Consider the model of a vertical market shown in class. Suppose that the supplier sells each unit to the retailer for pw = c, but, in addition, requires the retailer to pay a fixed fraction of the retailer's profits, p. 2 Formulate the retailer's profit-maximization problem under this contract and show that this contract maximizes the total industry profit. That is, show that for any given p, the sum of the supplier's profit and the retailer's profit is equal to the profit made by a vertically integrated monopolist. (Hint: The retailer gets (1 − p) · Ã, rather than л₁. No need to re-do the vertically integrated monopolist's profit. Just take it from the notes.)
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- Please no written by hand and no emage Two firms compete in a homogeneous product market where the inverse demand function is P = 20 −5Q (quantity is measured in millions). Firm 1 has been in business for one year, while Firm 2 just recently entered the market. Each firm has a legal obligation to pay one year’s rent of $1.6 million regardless of its production decision. Firm 1’s marginal cost is $2, and Firm 2’s marginal cost is $10. The current market price is $15 and was set optimally last year when Firm 1 was the only firm in the market. At present, each firm has a 50 percent share of the market.Determine the current profits of the two firms. Firm 1's profits: $Firm 2's profits: $What would each firm’s current profits be if Firm 1 reduced its price to $10 while Firm 2 continued to charge $15?Firm 1's profits: $Firm 2's profits: $Suppose that, by cutting its price to $10, Firm 1 is able to drive Firm 2 completely out of the market. After Firm 2 exits the market, does Firm 1 have an…In 1921 a classic set of experiments with chemical fertilizers were performed at the Rothampsted Experimental Station, an agricultural research institute in Hertfordshire, England. Researchers applied different amounts of a particular fertilizer to 10 apparently identical plots of land. The results for one test, using identical seed grain, are listed in the table. Compute the average and marginal product of fertilizer. Fertilizer Output Average Dose Index * Product 15 104.2 20 110.4 25 118.0 30 125.3 35 130.2 6 40 131.4 7 45 131.9 8 50 132.3 9 55 132.5 10 60 132.6 *Output without fertilizer = 100 (Round your responses for marginal product to three decimal places and round your responses for average product to one decimal place.) Plot 1 2 3 4 5 Marginal Product | | | T | 1.) Use the multipoint curve drawing tool to plot the AP and MP curves on a scale diagram. Remember toplot the value for MP at the midpoint of the output intervals. Use all the values provided in the table above to draw…Jims diner is just about to open in memphis, tennessee. however, jim is trying to decide whether he wants to offer coke or pepsi soda products. he determines that, to offer either product, he will have to spend $1500 in sunk costs to purchase and install the appropriate paraphernalia. Ultimately, he chooses to offer coke products and agrees to pay coke 5 cents per ounce of coke sold for the right to use its product. After jim makes the investments specific to his soda choice, coke returns and asks for a fixed (One-time) fee in addition to 5 cents per ounce. What is the most jim should be willing to pay? explain