The local steel market has an inverse demand function for a metric ton of steel:

P = 1450 – Q

Donald and Justin are the only two steel miners in the market who sell metric tons of steel. They both have a constant marginal and average cost of $100 per metric ton. Both farmers simultaneously determine the quantity of steel they are going to bring to the market. They do not confer beforehand, and the price is determined by the market after they arrive at the steel exchange market.

a. What are Donald and Justin’s best response functions?  

b. What are the Cournot equilibrium quantities and the market price?

c. What would be the price that Donald and Justin would charge if they choose to collude?  

d. Will the collusion agreement last? Why or why not? (be sure to show your reasoning in your analysis)  

e. Explain in detail how a monopolistically competitive firm can set its price greater than the marginal cost.  

Consider two stocks. For each, the expected dividend next
year is $100, and the expected growth rate of dividends is 3 percent. The risk
premium is 3 percent for one stock and 8 percent for the other. The economy’s safe
interest rate is 5 percent.

a). Use the Gordon growth model to compute the price of each stock.
Why is one price higher than the other? What does the difference in risk premiums
tell us about the dividends from each stock? Please note, to get full points, you
need to show all your steps and explain your answer.
b). Suppose the expected growth rate of dividends rises to 5 percent for
both stocks. Compute the new price of each. Which stock’s price changes by a
larger percentage?

Explain your answer. Please note, to get full points, you need to
show all your steps and explain your answer.

1. As the marketing manager for Fast Fones Industries Pty Ltd you have asked the accountant what it costs to make the FFI2020 model as you want to set a price for the phone. A similar phone produced by a competitor sells for $420. Your usual pricing policy is to set the price of phones at the cost of manufacturing plus 100% mark-up.

The accountant has given you the following costs:

Required

Calculate the cost and the price of the FFI2020 using each of the factory overhead rates that the accountant has supplied. How do the different allocation methods for factory overhead affect the pricing of the FFI2020 compared to the price of the competition and what are the likely implications of this for the marketability of the phone?

1. The average price of a gallon of unleaded regular gasoline was reported to be $3.44 in northern Kentucky. Use this price as the population mean, and assume the population standard deviation is $0.30.
   1. What is the probability that the mean price for a sample of 50 service stations is within ±$.06 of the population mean?
   2. What is the probability that the mean price for a sample of 100 service stations is within ±$.06 of the population mean?

2. The Wall Street Journal reported that automobile crashes cost the United States $162 billion annually. The average cost per person for crashes in the Tampa, Florida, area was reported to be $1900. Suppose this average cost was based on a sample of 50 persons who had been involved in car crashes and that the population standard deviation is known to be $500. What is the 90% confidence interval of the average cost per person for crashes in Tampa? What would you recommend if the study required a margin of error of $150 or less?

PLEASE DO THIS IN EXCEL AND SHOW FORMULA!

Q3. Suppose the market for clothes in the U.S. is perfectly competitive and is characterized by the following demand and supply equations (Q=quantity and P=Price): (34 pts in total) Demand for clothes: Qd 40 – 0.2P Supply of clothes: Qs 0.4P - 20 A. Find the market clearing equilibrium price P* and quantity Q* and draw a carefully labeled graph illustrating the market equilibrium. Also calculate the consumer surplus and producer surplus. (8pts) B. Suppose that the U.S. opens up to the world market and the price for clothes is in the world market is 70. What is the quantity demanded by consumer (Qd)? What is the quantity supplied by U.S. suppliers (Qs)? What is the new equilibrium price P′ in the U.S.? Does the U.S. import or export clothes? What is the new CS for U.S. consumers and PS for the U.S. suppliers? Illustrate the new CS and PS on another graph(12 pts) Q* =20 P* =100 CS =1000 PS =500

3. [Price Discrimination Application] You are the marketing manager of a firm that produces carbon fiber and sells this composite material to two distinct kinds of customers: satellite producers and bicycle manufacturers. Demand for carbon fiber by these two market segments is quite different, as described by the respective price equations: PS = 10−QS/600 and PB = 12−QB/100, where annual quantities [QS and QB] are in thousands of pounds and prices [PS and PB] are in dollars. Your firm estimates the marginal cost of carbon fiber production at $4 per pound.

a) For each segment, determine the firm’s profit-maximizing price and output. Is the firm practicing price discrimination?

b) Because of carbon fiber shortages, the firm’s total production capacity drops to only 1.5 million pounds per year. Determine the firm’s optimal quantities and prices in this case. (hint: you can use Solver in Excel to solve this question, but you don’t need to)