Suppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route, and the demand curve for tickets day is Q = 230 - 2p (so p = 115 - Q/2). costs of running a flight on this route a 450 + 40q, where q is the number of passengers on the flight. Each flight ha. capacity of 80 passengers. In Cournot equilibrium, each duopolist will run one flight per day and will make a daily prof O a) $3,250. O b) $1,600.
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- 1. It is 1908 and you are the CEO of Ford Motor Company. General Motors startedproducing cars this year and has quickly become your chief rival. Their recent entrance, as wellas your assembly line methods, allows you the advantage of producing cars faster and choosingyour output levels first. Assume the 1908 inverse demand function for cars is P = 3900 - Q(customers view cars as identical products at this point in time) and production costs are C(qi) =100qi. a. What is Ford’s profit-maximizing output level? GM's?b. What is the market equilibrium price?c. How much profit does each firm earn?d. As the assembly line is used by other firms, the first-mover advantage disappears (fast forward100 years to present day), and more firms have entered the market (e.g. FCA, Tesla, Hyundai,Toyota, Honda, etc.), what do you expect to happen to Ford’s profit (assume demand andcosts are the same)? Explain.e. From 1908 into the 1920s, Ford offered customers one car: the Model T. Further, Henry isfamous…In late 1991 two firms, Delta Airlines and the Trump Shuttle, provided air shuttle service between New York and Boston or Washington. The one-way price charged by both firms was $142 on shuttle mileage given to members of the Delta frequent-flier program from 1,000 to 2,000 miles, even though actual mileage from New York to either Boston or Washington is about 200 miles. Moreover, Delta also offered an extra 1,000 miles to frequent fliers who made a round-trip day's total to 5,000 miles. Almost simultaneously, Trump changed the frequent-flier mileage it gave shuttle passengers. (It participated in the One Pass frequent-flier program with Continental Airlines and some weekdays and $92 on weekends, with lower off-peak advance purchase fares. In September 1991 Delta increased the per-trip on the same day, raising a possible foreign carriers.) What sorts of changes do you think Trump made? Why?Suppose you are the economic adviser ofa company producing three brands of mobile pnones;Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units ofNokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing directorproposes an increase in price of Samsung X from e800 to e1000 per unit for which quantitydemanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unitfor which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 unitsUsing the mid-polint formula. compute the price elasticity of demand for each brand.From your answer in i, what is the type and economic interpretatiom of each brand'sii.value of elasticity.
- You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: splishy splashers, raskels, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of splishy splashers decreases by 8%, the quantity of raskels sold increases by 6% and the quantity of kipples sold decreases by 8%. Your job is to use the cross-price elasticity between splishy splashers and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price…An industry consists of two firms, firm 1 and firm 2. The demand function for the product of each firmsis given by q1 = 720 - 3p1 + 2p2 and q2 = 720 - 3p2 + 2p1. We assume for simplicity that the totalcost of production is zero:TC1 =TC2 =0. a) Are these two products substitutes or complements? Assuming that firms compete over prices, find theprice best-response functions for firm 1 and fin 2. Draw a diagram that shows the BRFs and theequilibrium. Are prices strategic substitutes or complements? Find the Bertrand Nash equilibrium inprices and outputs. Obtain the profits of each firm. b) Show that the duopolists have incentives to collude. Find their joint profit-maximizing price, output, andprofit: find each firm's price. output and protit. Is collusion a Nash equilibrium? If not, what is the optimaldefection for each firm? Show this game in a 2X2 matrix form. What does this imply about the Nashequilibrium or the stability of their collusive agreement? Is it a Prisoner's Dilemma…Suppose you are trying to determine the pricing for popcorn at a movie theater. There are just two types of customers (for simplicity assume just two total customers). One customer has a low demand for popcorn and will pay $1.00 for 16 oz of popcorn and nothing for a second 16oz. The high demand customer will pay $1.25 for the first 16oz and $0.50 for the second 16oz. If you charge one price for every 16oz a customer buys, what would you charge?
- You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gummies, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gummies decreases by 5%, the quantity of frizzles sold decreases by 4% and the quantity of kipples sold increases by 6%. Your job is to use the cross-price elasticity between guppy gummies and the other goods to determine which goods your marketing firm should advertise together. Relative to Guppy Gummies Recommend Marketing with Guppy Gummies Cross-Price…Suppose that the only movie theater in town has two types of customers, senior citizens and adults. The demand curve for senior citizens and adults are given by: Q₁ = 100 - P₁ Q2 = 120 - 0.5P₂ Where Q₁ denote the number of movie tickets purchased by senior citizens and Q2 denote the number of movie ticket purchased by adults. The cost function for the movie theater is given by: TC 2000 + 20 (Q₁ + Q₂) Suppose that the theater can charge two different prices and is going to apply the third-degree price discrimination as their pricing strategy: Demand curve for senior citizens C. Demand curve for adults Total Cost of Production a. List and explain all the conditions necessary for third-degree price discrimination! b. (i) What prices will the movie theater charge and how many tickets will be sold to each type of consumer: (ii) Explain graphically your answer in part b(i, Now suppose that MC is rising, show graphically the case where third-degree price discrimination may not be profitable…Suppose that two Japanese companies, Hitachi and Toshiba, are the sole producers (i.e., duopolists) of a microprocessor chip used in a number of different brands of personal computers. Assume that total demand for the chips is fixed and that each firm charges the same price for the chips. Each firm’s market share and profits are a function of the magnitude of the promotional campaign used to promote its version of the chip. Also assume that only two strategies are available to each firm: a limited promotional campaign (budget) and an extensive promotional campaign (budget). If the two firms engage in a limited promotional campaign, each firm will earn a quarterly profit of $14 million. If the two firms undertake an extensive promotional campaign, each firm will earn a quarterly profit of $11 million. With this strategy combination, market share and total sales will be the same as for a limited promotional campaign, but promotional costs will be higher and hence profits will be lower.…
- An Australian firm and a US firm produce a homogeneous good that is sold only in Japan. The marginal cost of producing the good is constant and equal to 30 in both countries. The demand curve for the good in Japan is: P = 120-Q where Q = QA +QUS represents the sum of the quantities. produced by the Australian and the US firms, respectively. (b) Assume the Australian firm can commit to an output before the US firm. Solve for the Stackelberg Equilibrium price, sales and profits of each firm in Japan. Price profit AUS2 ,output_US2 profit_US2 output_AUS2You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, raskels, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 12%, the quantity of raskels sold decreases by 27% and the quantity of cannies sold increases by 3%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity…A large company in the communication and publishing industry has quantified the relationship between the price of one of its products and the demand for this product as Price = 150 - 0.02 x Demand for an annual printing of this particular product. The fixed costs per year (ie., per printing) = $46,000 and the variable cost per unit=$40. What is the maximum profit that can be achieved? What is the unit price at this point of optimal demand? Demand is not expected to be more than 3,000 units per year. The maximum profit that can be achieved is $. (Round to the nearest dollar.) The unit price at the point of optimal demand is $ per unit. (Round to the nearest cent.) Enter your answer in each of the answer boxes.