12- Suppose the market for tennis shoes has one dominant firm and five fringe firms. The market demand is Q = 200- 2P. The dominant firm has a constant marginal cost of 10. The fringe firms each have a marginal cost of MC = 10 + 5g. What is the dominant firm's demand curve? a) Qd = 200 - 2P b) Qd = 420 - 3P Qd 210-3P o) Qd = 200 - 7P

12- Suppose the market for tennis shoes has one dominant firm and five fringe firms. The market demand is Q = 200- 2P. The dominant firm has a constant marginal cost of 10. The fringe firms each have a marginal cost of MC = 10 + 5g. What is the dominant firm's demand curve? a) Qd = 200 - 2P b) Qd = 420 - 3P Qd 210-3P o) Qd = 200 - 7P

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the market demand for a homogeneous product is given by Q = a - bP, where a and b are positive constants. The product is supplied by a dominant firm with a constant marginal cost c > 0 and n competitive fringe firms, each of which has a cost function ci(qi) = (qi^2)/(2ki) for i = 1, ... , n, where ki > 0 is a parameter. Suppose the dominant firm moves first by setting a price P, followed by competitive fringe rms setting their quantities, taking the price as given. a). Compute the equilibrium price and quantity level for each firm. b). How does the presence of competitive fringe firms affect the equilibrium price, as compared to the monopoly price by the dominant firm?
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2. Suppose the home country open up to free trade and a foreign competitor enters the market. Assume thatthe foreign firm has the same cost structure as the home firm (the monopoly from the previous question). The demand for its product is given by the inverse demand function: P = 120 −QD. The company’s costs are: T C = 20Q+ 200 and MC = $20A) Derive the best response function for each firm (h-home and f-foreign)B) Find each firms’ output, the home market price, and each firms’ profit from the home market3. Now, suppose that in addition to the home country opening up to free trade, the foreign country has alsoopened up to free trade. As a result, both firms sell their product in both markets.A) Find each firms’ overall output, market price in each market, and each firms’ overall profitB) Explain what effect free trade has (relative to no trade) on the firms and consumers
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3. Suppose there are two firms competing in a market. Both firms have the cost function c(x) =10x/2 while the demand function is given by x(p) = 100 – 0.1p. c. Suppose firm 1 decides its quantity first and firm 2 follows after observing x1. Find the profit maximizing quantity and price for this Stackelberg competition
QUESTION 2 Glyde Air Fresheners is the dominant firm in the solid room aromatizer industry, which has a total market demand given by Q = 80-2 P. Glyde has competition from a fringe of four small firms that produce where their individual marginal costs equal the market price. The fringe firms each have total costs given by TC; = 10 Q₁ + 2 Q2;. If Glyde's total costs are given by TCG = 100 + 6 QG, what are the total profits of the fringe firms? $32. $64. $96. $128. $160.
8. Suppose there are two identical firms in an industry who compete by setting quantities. The output of firm 1 is denoted by q1 and that of firm 2 is denoted by q2. Each firm faces a constant marginal cost of 3. Let Q denote total output, 1.e. Qq1 +42. The inverse demand curve in the market is given by P-15-Q (d) Suppose firms interact repeatedly over an infinite horizon, and firms have a common discount factor & € (0,1). Specify a trigger strategy for each firm to sustain the collusive arrangement as an equilibrium outcome. Cal- culate the minimum value of & for which such a trigger strategy collusion as an equilibrium in the repeated interaction. ain
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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. (b) If the industry allows free entry and all the firms are price takers, what is the number of firms in equilibrium?
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?
3) You were recently chosen to be the new CEO of Rocket to the Moon, a company that contracts with NASA and many corporations to launch satellites. Your Business Intelligence Officer, whom you affectionately refer to as Rocketman, estimates that the worldwide market demand curve for rocket launches is Q = 25,000 P/20. Including Rocket to the Moon, there are a total of three firms in the rocket business, each with a marginal cost of $200K per rocket launch. Firms in the rocket business must build each rocket they launch from the ground up, so there is considerable effort put into forecasting market demand, as well as the actions of competitors. a. What model would best characterize the rocket business, Cournot or Bertrand? Why? b. What is the equilibrium price, quantity, and profits for each firm in the market, assuming it is characterized by Cournot competition? How does your answer change if you assume the market is better characterized by Bertrand's competition? In what follows,…