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maximises profits

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EBK HEALTH ECONOMICS AND POLICY
EBK HEALTH ECONOMICS AND POLICY
7th Edition
ISBN:9781337668279
Author:Henderson
Publisher:Henderson
Chapter4: Economic Evaluation In Health Care
Section: Chapter Questions
Problem 7QAP
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Hi there just looking for the answer to 3C, using information provided from first picture.

3. In our third setup, there are four firms. Two firms who are identical with each other produce type () cars. Two other firms that are identical with each other (but not with the first two) produce type 1 cars. Each firm maximises profits given the output levels of the other three firms. The originally specified demand functions, (1), still apply to each type of car, and the originally specified cost functions, (2), still apply to individual firms. For example, if firms A and B produce type 0 cars, and firms C and D provide type 1, then Qo = qA + qB and Q1 = qc + qp and the cost functions are: CA(q4) = 50qA, CB(qB) = 50qB, Cc(4c) = 20qc, Cp(qp) = 20qp- (a) Write down a profit expression for a representative firm providing type O cars, and the profit expression for a representative firm providng type 1. (b) Take first-order conditions (c) What would the tax rates To, n have to equal, in order for the equi- librium quantities Qo, Q1 to be the same as the values you found in question 1(d)? Feel free to assume that two identical firms producing a type of car, will provide the same amount as each other.
Transcribed Image Text:3. In our third setup, there are four firms. Two firms who are identical with each other produce type () cars. Two other firms that are identical with each other (but not with the first two) produce type 1 cars. Each firm maximises profits given the output levels of the other three firms. The originally specified demand functions, (1), still apply to each type of car, and the originally specified cost functions, (2), still apply to individual firms. For example, if firms A and B produce type 0 cars, and firms C and D provide type 1, then Qo = qA + qB and Q1 = qc + qp and the cost functions are: CA(q4) = 50qA, CB(qB) = 50qB, Cc(4c) = 20qc, Cp(qp) = 20qp- (a) Write down a profit expression for a representative firm providing type O cars, and the profit expression for a representative firm providng type 1. (b) Take first-order conditions (c) What would the tax rates To, n have to equal, in order for the equi- librium quantities Qo, Q1 to be the same as the values you found in question 1(d)? Feel free to assume that two identical firms producing a type of car, will provide the same amount as each other.
There are two types of car, distinguished by how fuel eficient they are. Type O is the less fuel efficient type, and type 1 is the more fuel efficient. The inverse demand curves for the two types of car are: Po = 250 – Qo – Qı/2, P = 120 – Q1 – Qo/2. (1) Cost functions are Co(Qo) = 50Q0, C:(Q1) = 20Q1 (2)
Transcribed Image Text:There are two types of car, distinguished by how fuel eficient they are. Type O is the less fuel efficient type, and type 1 is the more fuel efficient. The inverse demand curves for the two types of car are: Po = 250 – Qo – Qı/2, P = 120 – Q1 – Qo/2. (1) Cost functions are Co(Qo) = 50Q0, C:(Q1) = 20Q1 (2)
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