1. The cost function for any potential firm in a manufacturing industry is C(y) = 2 + 8y + 2y2 (if a firm exits the industry, then its cost is zero). The inverse market demand function is given by P(y) = 100 – 2y. (c) If the government wants to limit the number of firms to 5 in this industry by issuing only 5 licenses (all the firms are Cournot oligopolists), what is the highest price that the government can charge for the license?

1. The cost function for any potential firm in a manufacturing industry is C(y) = 2 + 8y + 2y2 (if a firm exits the industry, then its cost is zero). The inverse market demand function is given by P(y) = 100 – 2y. (c) If the government wants to limit the number of firms to 5 in this industry by issuing only 5 licenses (all the firms are Cournot oligopolists), what is the highest price that the government can charge for the license?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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Only typed answer Two firms both produce leather boots. The inverse demand equation is given by P = 340 - 2Q, where P is the price of boots in USD/pair and Q is quantity of boots in million pair. The cost function is given by: C(Q) = 40Q. If the two firms are Stackelberg oligopolists), the output of the leader is equal to: 1) 60 2) 80 3) 75 4) 900
1. The cost function for any potential firm in a manufacturing industry is C(y) = 2 + 8y + 2y? (if a firm exits the industry, then its cost is zero). The inverse market demand function is given by P(y) = 100 – 2y. (a) If there is only one firm in the industry (the firm is a monopolist), what is the optimal output and the markup of the firm in equilibrium?
In the short run, each of the 5 firms in some industry faces a capacity constraint and constant marginal and average costs until this capacity is reached (see the table below). Marginal Cost = Average Cost Maximum output Firm 1 $50 100 Firm 2 $60 20 Firm 3 $67 50 Firm 4 $80 200 Firm 5 $92 70 Assuming that no firm has monopoly (pricing) power, what will be the quantity supplied at a price of (a) $40 (b) $55 (c) $73 (d) $99
Q1: What is the function for TR, TC, MC and MR? Q2: What is the optimal price, quantity and profit?
1.-Dayna’s Doorstops, INC. (DD) is a monopolist in the doorstop industry. Its total cost function C(⋅) is given by the quadratic function of output C(Q) =100 – 5Q + Q2 . The inverse demand function for doorstops P(⋅) is given by the linear function P(Q) = 55 – 2Q . Note that the marginal cost C′(Q) is not constant. (Also, it happens to be negative for 0 ≤ Q < 2.5.) (a) Write down the profit-maximizing problem for DD, and determine its optimal output, QM. (b) Find the profit-maximizing price set by DD, PM and its marginal cost at the output level QM. From these two pieces of information, can you compute the elasticity of demand at that same level of output without taking any derivative? (c) How much consumer surplus CSM and producer surplus PSM and total surplus does DD generate by its profit-maximizing plan? (d) Find the profit-maximizing output, Qc, if DD acted like a price-taker (i.e., a perfect competitor). (e) Find the profit-maximizing price set by DD, Pc, as well as its…
Suppose two firms engage in simultaneous quantity competition. Both firms have 0marginal cost. Firm A : P(Q)= 24-Q Firm B: P(Q)= 24-2Q a) Find the Nash Equilibrium quantities q^NE and profits.(b) Find the Monopoly Quantity QM and Profit.(c) Now suppose the game is repeated infinitely and each firm has a common discountfactor δ. Find the required discount factor to sustain the following grim triggerstrategy as a SPNE: Play Q^M /2 if this has been played in every previous period,otherwise play q^NE.
My question is, Assuming the firms are Bertrand duopolists, what is likely to happen? Explain verbally?
Assume that the demand for electric cars is p = 100-q (where q is the quantity and p is the price), and that an innovation can reduce the constant marginal cost of production from 70 to 60. What is the definition of nondrastic/drastic innovation? Confirm that the innovation for electric cars is nondrastic. Show that marginalcost would have to be reduced to less than 40 for theinnovation to bedrastic. Suppose that the industry is a monopoly (not threatened by entry). Howmuch is this firm willing to pay to acquire the innovation?
5. Tom is a monopolist input supplier to Dick and Harry. Tom's marginal cost is 1. Dick and Harry are duopolists with production function q x/2 No firm has fixed costs. The demand for the final product is given by Q 100-p. a) Assume Dick and Harry buy the input from Tom at price k. What are their cost functions? b) Find the Cournot equilibrium quantities. c) What price, k, should Tom set? d) Now suppose Dick could buy Tom's firm and stop supplies of the input to Harry so that Dick would be a monopolist. How much is Dick willing to pay for Tom's firm? e) How much is Tom willing to sell his firm for?
2. Consider a monopolistic competitive industry with 4 firms producing the same good. The (inverse) demand for the good is given as: p=30-Q where is total units of the good produced by the firms: Q = Eq. Each firm chooses their output qi to maximize profits. The cost of producing q units of output is the same for all firms: C(qi) = 6qi for all i = 1, ..., 4. (a) Suppose all 4 firms choose their outputs at the same time (i.c., Cournot model), what will be the profit-maximizing outputs for each firm. [Note: Firms are iden- tical and face the same demand curve, hence model is symmetric]
Consider a simple monopolistic competition industry (many firms) in whicheach firm in the industry has one store. The store costs $200 per week andthe marginal cost is $10 per unit of output in addition to the fixed cost of the store. Hint: Mathematically this problem can be solved just like a monopoly problem. (a) If the typical the demand facing each individual firm is QD = 40−P eachweek, what price will a typical firm in this industry charge? (Hint: IfQD = 40 − P then P = 40 − QD and MR = 40 − 2QD). (b) Is the firm making a positive profit? What is the producer surplus? Whatis the profit after fixed costs? (c) Will new firms enter the market if demand stays the same and new firmsface the same demand and have the same costs? (d) In general, what is the long run profit of an average firm in a monopolistically competitive market.