2. Consider the following Ramsey pricing Lagrangian exercise. max (B1(91) + B2(q2) – C191 – c292 – F +A {p1(qı)qı + P2(92)q2 – c191 – c292 – F}] 91.92 Bi(qi) represents the area under the demand curve for i, and p¿(q.) is the demand for good i. a) Give the first-order conditions from the above maximization. b) Take the first-order condition for q1, and solve for the Ramsey pricing rule, in termns of the price-cost margin, and the elasticity of demand: Əqı Pı api 91 €1 c) Suppose the market is such that the demands for q1 and q2 are both relatively elastic. Would the associated Ramsey price outcome be less efficient than if both demands were relatively inelastic? Explain.

2. Consider the following Ramsey pricing Lagrangian exercise. max (B1(91) + B2(q2) – C191 – c292 – F +A {p1(qı)qı + P2(92)q2 – c191 – c292 – F}] 91.92 Bi(qi) represents the area under the demand curve for i, and p¿(q.) is the demand for good i. a) Give the first-order conditions from the above maximization. b) Take the first-order condition for q1, and solve for the Ramsey pricing rule, in termns of the price-cost margin, and the elasticity of demand: Əqı Pı api 91 €1 c) Suppose the market is such that the demands for q1 and q2 are both relatively elastic. Would the associated Ramsey price outcome be less efficient than if both demands were relatively inelastic? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

What is land property
Question 1.3 only
do fast don't use chatgpt answer,
i will 10 upvotes no chat gpt
N4
How any coffee shop could be CSR?
Please work these out both parts do not understand
69-70
I need help with HW.
The graph shows the market for mugs in which the government has imposed a tax of $4 per mug. Draw a point to show the price paid by buyers and the quantity bought. Draw shapes that represent the following: 1) consumer surplus. Label it CS. 2) producer surplus. Label it PS. 3) the tax revenue received by the government. Label it TR. 4) the deadweight loss created by the tax. Label it DWL. >>> A label can be repositioned by clicking on the edge of the label box and dragging it onto the shape. esc ↑. C Selected: none $ ▸ 0
How do sales taxes typically apply in a business environment?
M1