(b) Suppose now that you are an economic advisor (next year! (-;)) and you are approached by the Competition Authority with the following question. "Look, these firms have filed a proposal to merge into a single firm. For us, the key is that consumers do not have to pay higher prices after the merger." What advice would you provide to the Competition Authority, to allow the merger or not
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- An industrial firm makes two products, A and B. These products require water resources where they are very scarce. The products they make are unique, and hence they can set the unit price of each product at any value they want to. However, experience tells them that the higher the unit price for a product, the less amount of that product they will sell. The relationship between the unit price and quantity that can be sold is given by the following two demand functions: Assume for simplicity that the unit price for product A is (16 - A) and for product B is (18-2.5B). Suppose the total amount of A and B could not exceed the total amount of Tmax. Where Tmax = 10. Please use "Lagrange Multiplier" method to determine what are the amounts of A and B, and their unit prices, that maximize total revenue (Set the marginal increments at 1).A diner has no competition when it comes to it's famous reuben sandwich combo plate, for which the graph shows the diners demand (d), marginal cost (mc), and marginal revenue (mr), curves. The price of $20 is based on the mr = Mc rule for profit maximazation. The rectangular region shown represents the net revenue from sales of the sandwich (total revenue from reuben combo sales minus total variable costs associated with reuben combo sales). Now, suppose the diner decides to raise the price during the lunch hour, which accounts for 60% of reuben combo sales, knowing that it's lunch-hour patrons are the most loyal buyers of the reuben combo and also that they are locked into the lunchtime slot by their work schedules. The diner raises the price just enough not to lose any lunch-hour buyers. Use the area tool to outline the region representing the resulting additional net revenue from the price increases. Part 2: As a result of the revised price structure, the diners net revenue…The demand for a new computer game can be modeled by p(x) = 43-4 In x, for 0sxS800, where p(x) is the price consumers will pay, in dollars, and x is the number of games sold, in thousands. Recall that total revenue is given by R(x) =x•p(x). Complete parts (a) through (c) below. a) Find R(x). R(x) = b) Find the marginal revenue, R'(x). R'(x) =O c) How many units will be sold if the price that consumers are willing to pay is $40? The number of units that will be sold is (Round to the nearest whole number as needed.)
- 11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. оп апy Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field…Assume the inverse demand function in a market is given by P(Q) = 500 - Q where Q is the total industry output, that is the sum of the output of all firms in the market. There are two firms (indexed by i = 1,2) who both have a cost of producing the good given by c(qi) = 10 * qi The two firms are competing in the Cournot manner, that is they choose their quantities simultaneously in order to maximize profits.In small collegetowns, it is not uncommon that the rental market is dominated by one or a handful ofproperty management companies. Suppose demand for housing is given by MWTP(Qd)=2400-4QdSupply from the monopolistic landlord can be characterized by MC(Qs)=1500+Q°1. How many units will be rented in this collegetown? At what price?
- a) How can a firm determine the best level of output and price for products that are jointly produced in fixed proportions?5. Foreign direct investment versus licensing Giocattolo is a profit-maximizing firm producing toy cars-a capital-intensive good-which are sold in its home country, Italy, and abroad in Spain. Giocattolo chose foreign production as a method of penetrating the Spanish market and has to decide whether it is more efficient to directly invest in Spain to establish a production subsidiary or to license the technology to a Spanish firm to produce its goods. On the following graph, AVC Spain is the average variable cost curve of a Spanish firm producing toy cars. (This curve represents costs such as labor and materials.) The curve ATC subsidiary represents the total unit costs Giocattolo will face if it establishes a subsidiary in Spain. PER-UNIT COST (Dollars) 10 9 8 2 1 0 0 15 ATC Subsidiary + 105 30 45 60 75 90 PRODUCT (Thousands) 120 AVC Spain + 135 150 ?James mainly sells confectionery items, newspapers, magazines and cigarettes in his convenience store. Noting his small business is not thriving, he thought of selling hot pies and rolls too. Suppose the total cost function for rolls and pies is, TC = 900 + 50Q, Q = Q1 + Q2 Where Q1 and Q2denote the quantities of rolls and pies respectfully. If P1 and P2 denote the corresponding prices, the inverse demand equations are. Q1 = 70 - P1 and 0.5Q2 = 100 - P2 a)If James decides to make a total of 48 rolls and pies per day and charges different prices as above (that is, P1 ≠ P2 ), how many of rolls and pies each should he make in order to maximize the profit of a particular day? Estimate and interpret the Lagrange Multiplier λ [note: assume second-order conditions are satisfied]. b)Using your knowledge of input-output tables, explain which components of the economy will be affected if all convenience stores, including James’, closed down for three months due to the COVID-19. What would…
- Exercise 4.6 An econometrician hired to analyse a local golf course has determined that there are two types of golfers, the regular and the occasional. The annual demand for games from regular players is given by QH = 24 – 0.3P, where P is the price of a round of golf. On the other hand, the annual demand for occasional items is given by QO = 10 – 0.1P. The marginal cost and the average total cost per item are equal to €20. a) If you could distinguish between regular and casual players, what price would be set for each type? How many games would each type of player play? How much profit could the golf course generate? Represent graphically. b) As an alternative to the discrimination of third degree prices, those in charge consider a double tranche rate according to which the members can play as many games as they wish at a price of € 20 per game. How much profit will the golf course generate if it charges all players the same annual fee for becoming a member of the club? What if you…No written by hand solution Suppose that the market for video games is competitive with demand function Qd = 170 – 4p + 2Y + 3pm – 2pc, where Qd is the quantity demanded, p is the market price, Y is the monthly budget that an average consumer has available for entertainment, pm is the average price of a movie, and pc is the price of a controller that is required to play these games. Given that Y = $100, pm = $30 and pc = $30, use Excel to calculate quantity demanded for p = $10 to p = $80 in $5 increments. Using Excel’s spreadsheet Find Qd = ________ when P=$30. Find Qd = ________ when P=$45. Now, Y increases to $120. Re-calculate the demand schedule and find Qd = ________ when P=$20. Let Y = $100 again, but pm increases to $40. Re-calculate the demand schedule and find Qd = ________ when P=$25. Let Y = $100, pm = $30, and pc increases to $40. Re-calculate the demand schedule and find Qd = ________ when P=$50.1) Suppose you are operating a discount movie theater and want to increase profits by charging adults and kids different prices. Assume there are no variable costs, just fixed costs to show the movie. You estimate the inverse demand function for kids to be: p1(y1) = 4 - 0.05y1 You estimate the inverse demand function for adults to be: p2(y2) = 9.6 - 0.08y2 a) How many kids will watch a movie? What price will you charge kids? b) How many adults will watch a movie? What price will you charge adults?