Q: Consider trade relations between the United States and Mexico. Assume that the leaders of the two…
A: a. If Mexico puts low taxes then the US should have high tax as the US gets $30, however if the US…
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Q: Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether…
A: P = 900 – q1- q2 a) In the first stage, Verizon has a large scale supermarket, and as a result, ATT…
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A: When in a small town in a remote area where only two residents, Maria and Miguel , own dairies that…
Q: Consider a market with four firms. Firms A and B have a marginal cost of $7. Firm C has a marginal…
A: According to the Bertrand model of oligopoly the prices (not quantities) are chosen independently by…
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Q: d) Explain what is meant by the term Paretooptimality.Explain whether the Pareto criterion is an…
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Q: Consider the standard Hotelling model (two shops selling an identical good, same marginal costs,…
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Q: Which of the following statements about the Cournot model studied in lectures is false? Firms in the…
A: The Cournot model is an economic model that describes competition between firms in an oligopoly…
Q: Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether…
A: Given that. P = 900 – q1 – q2 For small store, I = 50,000 And MC = 0 For super market I = 1,75,000…
Q: In the Salop model the price for a firm in a symmetric equilibrium is p (n) = c + where C is the…
A: Given information Inverse demand function for firm in symmetric equilibrium=P(n)=C+T/n Free entry…
Q: Two firms produce the same commodity, both with zero cost. The demand for this commodity is D(P) =…
A: A Nash equilibrium is a situation in a game where no player can improve their payoff by unilaterally…
Q: Demand and supply are both specified as functions of price, ruling out other extraneous influences…
A: Market dynamics are the processes in economics that modify the balance of supply and demand,…
Q: an example of a market where a Bertrand model would not be plausible
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Q: The pricing model for iTunes has been to price songs individually. In contrast, Spotify opted to…
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Q: Explain Bertrand Model: Price Competition elaborately with a case study/problem covering everything…
A: Bertrand competition, named after Joseph Louis François Bertrand, is an economics model of…
Q: Explain why the equilibrium of the Bertrand model is a Nash equilibrium
A: It is a model of an oligopoly market, firms independently choose prices in a way to maximize their…
Q: Jim and TJ are Cournot duopolists. They each make an identical product. They will simultaneously…
A: Introduction Tim and Tj are Cournot duopolist. They each make identical product and have identical…
Q: In a Cournot model, firms Go and Stop compete by producing good X. Demand is X = 50 - 0.5P, where P…
A: We have given Demand: P=50-0.5X TC =0 for both firm If firm Go produces X1 and firm stop produces…
Q: Jane and Sara are competing orange juice salespersons in Amherst. Their stands are next to each…
A: When two sellers compete in price it formulates into a Bertrand duopoly game where both the seller…
Q: Three firms with identical marginal cost of 30 compete in a market with inverse demand of P = 50 -…
A: Demand: It refers to the consumption of goods and services in the economy. The more demand of the…
Q: If consumers are evenly spread throughout the city, firms are more likely to locate in the middle of…
A: The following points determine how the firm choses to establish itself - The determinants are:…
Q: The marginal cost of a product is fixed at MC = 20. The demand for the product is Q = 100 - 2P.…
A: Considering two firms, firm 1 finds firm 2’s output to be given as q2. Then the firm 1 will maximize…
Q: Extend the Cournot model discu in class to chooses to produce qi at cost cq; where c> 0. The set up…
A: An oligopoly is a form of market where a small variety of large firms dominate the industry. In…
Q: Suppose we have a Hotelling model with N = 150 people who consider the good very valuable at V =…
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Q: 12.3. Return to the example used in the text for the Cournot model, where demand was equal to Q =…
A: We know that both firms have the same cost structure because nothing is mentioned. So we will use…
Describe the Cournot and the Bertrand models. Discuss the main critics to both models.
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- Consider the following Stackelberg model. There are two firms in the market. Firm 1 is the leader and firm 2 is the follower. Firms can decide to produce low or high. The extensive-form representation below presents the profits depending on production decisions of firms. The first value is profit of firm 1 and second value is profit of firm 2 depending on their production decisions. Solve using backward-induction. What are the optimal production levels of both firms? Describe how you found the optimal strategy using words.see the imageIn the Salop model the price for a firm in a symmetric equilibrium is p (n) = c + where C is the marginal cost, T is the transportation cost for n consumers and is the distance between two neighbouring firms such that n is the number of firms in the industry. The zero profit condition that determines the number of firms in a free entry equilibrium is (p (n) – c)- – e = 0 where e is the exogenous sunk cost for a firm to enter the industry. Suppose T = 100 and e = 4. The number of firms in the free entry equilibrium is (numeric).Three firms with identical marginal cost of 30 compete in a market with inverse demand of P = 50 - 8Q. If the firms behave as the Cournot model suggests, what is the pass through rate for a change in marginal cost?
- Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether and how to enter a potential market. Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT. To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost. Assume Verizon enters and builds a Large store (i.e. chooses to build a Large store L1 at the first stage.) Calculate Verizon's profit for the following cases: a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice. b.) ATT chooses to build a Small store S at the second stage…Verizon can be viewed as a first mover. Now suppose both ATT and Verizon are considering whether and how to enter a potential market. Market demand is given by the inverse demand function p= 900−q1−q2, where p is the market price margin, q1 is the quantity sold by Verizon and q2 is the quantity sold by ATT. To enter the market, a retailer must build a store. Two types of stores can be built: Small and Large. The Small store requires an investment of $50,000, and it allows the retailer to sell as many as 100 units of the goods at zero marginal cost. Alternatively, they can pay $175,000 to construct a Large store that will allow it to sell any number of units at zero marginal cost. Assume Verizon stays out of the potential market (i.e. chooses not to enter N1 at the first stage, q1= 0). Calculate Verizon's profit for the following cases: a.) ATT chooses not to enter N at the second stage after viewing Verizon's choice. b.) ATT chooses to build a Small store S at the second stage…Consider the linear city (Hotelling's) model we studied in class. Firm 1 and Firm 2 are the two firms in the city. Consider each of the following statements in isolation. Which statement is correct? Group of answer choices Suppose city zoning laws force Firm 1 and Firm 2 to locate at either end of the city. Both firms will therefore set price close to marginal cost Suppose a regulator sets the price for both firms at p; both firms will therefore choose to locate as close to each other as possible If consumers are evenly spread throughout the city, firms are more likely to locate in the middle of the city If transport costs are low, the firms will exploit this by raising price None of the other answers are correct
- Consider trade relations between the United States and Mexico. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are shown in the image attached. a) What is the dominant strategy for the United States? For Mexico? Explain. b) Define Nash equilibrium. What is the Nash equilibrium for trade policy? c) In 1993, the U.S. Congress ratified the North American Free Trade Agreement, in which the United States and Mexico agreed to reduce trade barriers simultaneously. Do the perceived payoffs shown here justify this approach to trade policy? Explain.Which of the following is correct?The pricing model for iTunes has been to price songs individually. In contrast, Spotify opted to offer unlimited song playing for a monthly fee. True or False: Spotify's pricing model will likely yield more profit if the value that individuals attach to songs varies greatly across songs and across different people. True False