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11 8. Suppose an industry produces an undifferentiated product for which market demand is given by X = A- P. There are many potential producers
for this product, each of whom has a production function of the form: Fixed costs of F must be paid for being in business, and the marginal cost of a unit of production is a constant k . We imagine that firms decide whether to enter the industry under the supposition that, after all the firms that are going to enter do so, competition will be according to the Cournot model. That is, if N firms are in the market each has Cournot conjectures. An equilibrium is achieved with N firms in the industry if
each firm, having its Cournot conjectures, does no worse than break even, whereas if another firm entered and made this an N + 1 firm Cournot oligopoly, all the firms would lose money. What is the equilibrium in this case? What (if anything) would be the equilibrium if firms had Bertrand conjectures throughout? (Note well: The number of firms is set and then firms compete. The exercise is not that firms charge a price, say, and then other firms can enter assuming firms already in the industry will stick to that price. But as long as we're sketching this alternative, what would be the Cournot and Bertrand equilibria with entry under this alternative scenario?)
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- Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output)a. What output should farmer 1 produce if he or she expects their rival to produce 20 units?Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, the short run market supply function is: Qs = 40P if price is greater than $20. Q$ = P/4 if price is greater than $20. Q³ = 2.5P if price is greater than $20. QS = 300-10P for all prices.Let us consider an economic sector characterized by the following data. The (inverse) demand function is p = 20 -2g with q the quantities produced by the firms in the sector and p the price. The total cost of production for any firm in the sector is: CT(a) = q* - 4g +5 a) First, assume that there is only one firm, firm 1, in the industry. Calculate the price, quantity produced and profit of firm 1 in a monopoly situation that wants to maximize its profit b) Firm 1 seeks to deter the entry of another firm, firm 2, into its market through a sustainable monopoly strategy. Calculate the equilibrium price, quantity and profit of firm 1 given this strategy
- 0:29:15 Suppose that the market demand for a certain product is given by P = 670 – Q. where Qis total industry output. There are only three firms F, F,, F, that manufacture that product. The three firms have the following marginal costs: c = 32, c2 = 34 and C3 = 36. The leader (F) makes a production decision q1. F2, after observing the quantity chosen by F chooses its own quantity q2. Finally F3, after observing the quantities chosen by F, and F, chooses its own quantity q3. a) Determine the output levels that will be produced in a Stackelberg -Nash equilibrium 91 = 93 = b) Determine the price level in such an equilibrium P= c) Determine the profit levels in such an equilibrium U1 = uz=In the astrology market there are n astrologers offering the telephone service "I can read your stars", whose demand can be represented by the function Q = 1000 – 2p, where Q is the number of calls and p the price of each call (we assume all calls last the same amount of time and they have a fixed price). Marginal costs per calls of each fortune teller are identical and constant, c = 1. Consumers perceive all astrologers as having the same reliability as they all look at the stars with their own eyes. Thus, consumers will consult the astrologer offering the lowest price. If all astrologers offer their service at the same price they share the market equally. Calculate the price, and the total number of astrologers in the market if the competition among astrologers takes place 'a la Bertrand. (a) p = 0.9; Q = 998. (b) p = 1; Q = 990. (c) p = 1.5; Q = 997. (d) All the other solutions are wrong. Astrologer A have hear of a brilliant astronomer named Galileo who is about to be killed for…There are two firms in the pumpkin industry: C and S. The demand function for pumpkins is q = 3, 200 - 1, 600p. The total number of pumpkins sold at the market is q = qC + qS, where qC is the number that C firm sells and qS is the number that S firm sells. The cost of producing pumpkins for either firm is $0.50 per pumpkin no matter how many pumpkins they produces. 1. Every spring, each of the firms decides how many pumpkins to grow. They both know thelocal demand function and they each know how many pumpkins were sold by the other firmlast year. In fact, each firm assumes that the other firm will sell the same number this year asits sold last year. So, for example, if firm S sold 400 pumpkins last year, firm C believes thatfirm S will sell 400 pumpkins again this year. If firm S sold 400 pumpkins last year, what doesfirm C think the price of pumpkins will be if firm C sells 1,200 pumpkins this year? 2. If firm S sold 400 pumpkins last year, firm C believes that if he sells qtCpumpkins…
- Suppose there are in total 3 firms in the market. Firm 1 decides its output first, then Firm 2 and Firm 3 decide their outputs simultaneously. The inverse demand function is p = 14 – 3q, where q = q1 + q2 + 43, and each firm's cost function is c(q.) = 2q?. What is the quantity that Firm 1 produces? Round your answer to 2 decimal points. Answer: The correct answer is: 1.04Suppose the graph depicts the marginal cost (MC) curves of two profit maximizing Texas cotton farmers, Jesse and Neal. Assume Jesse and Neal sell their cotton in the same competitive market. If the market price is $4 per bale, how many bales of cotton should each farmer produce? Jesse's optimal output: 800 Neal's optimal output: 400 bales MC Neal = MC Jesse MC Neal MC Jesse Price and cost $10- 9 8 7 160 5 4 3 2 0 MC, Neal MC, Jesse 100 200 300 400 500 600 700 800 900 1000 Bales of cottonCarl and Simon are two pumpkin growers who are the only sellers of pumpkins at the market. The demand function for pumpkins is Q = 16,400 - 400P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose further that each farmer has a constant marginal cost of $1 for each pumpkin produced. Assume that Carl can tell, by looking at Simon's fields, how many pumpkins Simon planted and how many Simon will harvest in the fall. (Suppose that Simon will sell every pumpkin that he produces.) Therefore, Carl sees how many pumpkins Simon is actually going to sell this year. Carl has this information before he makes his own decision about how many to plant. If Simon plants enough pumpkins to yield Qs this year, then Carl knows that the profit maximising amount to produce this year is QCarl = Group of answer choices a. 8,000 - Qs/2. b. 16,400 - 400Qs. c. 16,400 - 800Qs. d. 4,000 - Qs/2. e. 12,000 - Qs
- Carl and Simon are two pumpkin growers who are the only sellers of pumpkins at the market. The demand function for pumpkins is Q = 8,400 - 800P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose further that each farmer has a constant marginal cost of $.50 for each pumpkin produced. If Carl believes that Simon is going to produce Qs pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits. Carl’s reaction function is QCarl = Group of answer choices a. 2,000 - Qs/2. b. 8,400 - 800Qs. c. 8,400 - 1,600Qs. d. 4,000 - Qs/2. e. 6,000 - Qs.A gas station sells gas for... A gas station sells gas for capacity of a gas station is 700 liters per day, that is it can store any quantity of gasoline up to this capacity. A gas station cannot sell more gasoline per day than it currently stores. Suppose the demand for gasoline is uniformly distributed between 0 and 1500. Profit of a gas station is given by its revenue from selling gasoline minus the cost of buying it from a wholesaler. Provide a numerical answer to each question. ipertiterandbussitusingthewholesalepricco p0.5 per liter. A storage 2) Given the current storage capacity, find the quantity of gasoline the gas station must store in order to maximize its expected daily profit.Carl and Simon are two pumpkin growers who are the only sellers of pumpkins at the market. The demand function for pumpkins is Q = 16,400 – 400P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins. Suppose further that each farmer has a constant marginal cost of $1 for each pumpkin produced. Assume that Carl can tell, by looking at Simon's fields, how many pumpkins Simon planted and how many Simon will harvest in the fall. (Suppose that Simon will sell every pumpkin that he produces.) Therefore, Carl sees how many pumpkins Simon is actually going to sell this year. Carl has this information before he makes his own decision about how many to plant. If Simon plants enough pumpkins to yield Qs this year, then Carl knows that the profit maximising amount to produce this year is Qcarl = O 8,000 – Qs/2. O 16,400 – 400Qs. O 16,400 – 800Qs. O 4,000 – Qs/2. O 12,000 – Qs.