7. 2 Imperfect competition (2022)Two companies, Thomas Inc and Edison Inc, are the only producers of electrical vehicles. The demand forelectrical vehicles is given by P=200-2gr-2gr. where qr is the quantity Thomas Inc produces and qeis thequantity Edison Inc. produces. Both Thomas Inc and Edison Inc produce electrical vehicles at a constantmarginal and average cost of $20 per vehicle.2.0p aFind the total quantity of electrical vehicles produced in the Cournot equilibrium!2.0p b Suppose that (for this subquestion only) the (marginal and average) cost per vehicle changes to $50. Howdoes this affect total quantity and price in Cournot equilibrium? For both total quantity and price, statewhether it goes up, down, or stays the same (no further explanations are required).The total quantity producedand the price2.0p c Suppose that (for this subquestion only) a third company enters the market for electrical vehicles andcompetes with Edison Inc and Thomas Inc. This company has exactly the same cost of production asThomas Inc and Edison Inc and consumers perceive its electrical vehicles as identical. How does this entryaffect total quantity and price in a Cournot equilibrium? For both total quantity and price, state whether itgoes up, down, or stays the same (no further explanations are required).Following the entry of a third country, total quantity producedand the price2.0p d Suppose that (for this subquestion only) the nature of competition changes to a Stackelberg competitionwhere Thomas Inc first announces its production targets publicly. Assume for this subsection that thereaction function of Edison Inc is qe=45-0.5g7. Determine Thomas Inc's output in the Stackelbergequilibrium, still assuming that firms compete by setting quantities!

Introduction Here are the two companies: Thomas Inc. and Edition Inc. Demand of electrical vehicles…

2 Imperfect competition (2022) Two companies, Thomas Inc and Edison Inc, are the only producers of electrical vehicles. The demand for electrical vehicles is given by P=200-2qr-29E, where qr is the quantity Thomas Inc produces and qeis the quantity Edison Inc. produces. Both Thomas Inc and Edison Inc produce electrical vehicles at a constant marginal and average cost of $20 per vehicle. 20p a Find the total quantity of electrical vehicles produced in the Cournot equilibrium! 2.0p b Suppose that (for this subquestion only) the (marginal and average) cost per vehicle changes to $50. How does this affect total quantity and price in Cournot equilibrium? For both total quantity and price, state whether it goes up, down, or stays the same (no further explanations are required). The total quantity produced and the price

2 Imperfect competition (2022) Two companies, Thomas Inc and Edison Inc, are the only producers of electrical vehicles. The demand for electrical vehicles is given by P=200-2qr-29E, where qr is the quantity Thomas Inc produces and qeis the quantity Edison Inc. produces. Both Thomas Inc and Edison Inc produce electrical vehicles at a constant marginal and average cost of $20 per vehicle. 20p a Find the total quantity of electrical vehicles produced in the Cournot equilibrium! 2.0p b Suppose that (for this subquestion only) the (marginal and average) cost per vehicle changes to $50. How does this affect total quantity and price in Cournot equilibrium? For both total quantity and price, state whether it goes up, down, or stays the same (no further explanations are required). The total quantity produced and the price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Exercise 4. You are a manager at a certain factory that designs small gadgets. The factory has been quite successful in the past years. Your CEO is wondering whether or not it is a good idea to expand the factory this year. The cost to expand the factory is $1.5M. Doing nothing will result in expected $3M in revenue if the economy stays good and people continue to buy plenty of gadgets, but only $1M in revenue is expected if the economy is bad. On the other hand, expanding the factory carries an expected $6M in revenue if economy is good and $2M if the economy is bad. Assume there is a 40% chance of a good economy and a 60% chance of a bad economy. Also, assume the costs of operating the factory account to $.5M if the factory is expanded and $.3M if not. a. Illustrate a Decision Tree showing these choices. b. What should you do?
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