Firm 1 and firm 2 compete in a Cournot oligopoly in homogeneous goods. Firm 1 is a domestic firm, that the government would like to favour. They can either give firm 1 a per unit subsidy or impose a per unit tax on firm 2. O a. We do not have enough information to compare consumer surplus under the two policies. Ⓒ b. Consumer surplus will be higher under the policy which gives firm 1 a per unit subsidy. O c. Consumer surplus will be higher under the policy which imposes a per unit tax on firm 2. O d. Consumer surplus will be the same under both policies.

Firm 1 and firm 2 compete in a Cournot oligopoly in homogeneous goods. Firm 1 is a domestic firm, that the government would like to favour. They can either give firm 1 a per unit subsidy or impose a per unit tax on firm 2. O a. We do not have enough information to compare consumer surplus under the two policies. Ⓒ b. Consumer surplus will be higher under the policy which gives firm 1 a per unit subsidy. O c. Consumer surplus will be higher under the policy which imposes a per unit tax on firm 2. O d. Consumer surplus will be the same under both policies.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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[Q: 11-4660750j Consider a monopoly that faces an inverse demand curve with a constant elasticity, p(Q) = Q°, and that has a constant marginal cost, MC(Q) = m. If the own-price elasticity is e = - 6.9, marginal costs are m=7, and the government imposes a specific tax on the monopolist, what will be the tax incidence on consumers? O A. 65.42% O B. 38.1% OC. the same incidence as when the tax is imposed on a perfectly competitive firm. O D. 50% O E. 116.95%
Homework (Ch 14) 1. There must be many buyers and sellers-a few players can't dominate the market. 2. Firms must produce an identical product-buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for th problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive? In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed. Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store.…
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An amusement park decides to apply two-part tariff rule to set price, given the demand equation P-6-2.5Q and MC =$1. Based on equilibrium price (P) and quantity (Q), how much is the maximum upfront fee the park could charge each visitor? (please review notes on 'Consumer value (refer to slides 1, 2, and 3)) O $0.75. Ⓒ$1.0. O $1.25. O $1.5.
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Please no written by hand solution
Price and cost (dollars per unit) Pi P₂ P3 MR S=MC Q₂ Q3 Quantity (units per hour) Which of the following is true? In the above figure, if the market is O a. perfect competition, output will beQ3 and price will beP3. O b. a monopoly, output will beQ1 and price will beP3. O c. a monopoly, output will beQ3 and price will beP3 O d. perfect competition, output will beQ1 and price will beP1.
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2.- Each of two firms, firms 1 and 2, has a cost function C(q) = 1 2 q; the demand function for the firms' output is Q = 1.5-p, where Q is the total output. Firms compete in prices. That is, firms choose simultaneously what price they charge. Consumers will buy from the firm offering the lowest price. In case of tying, firms split equally the demand at the (common) price. The firm that charges the higher price sells nothing. (Bertrand model.) (a) Formally argue that there could be no equilibrium in prices other than p1 = p2 = 1 2. (b) Solve the same problem, but this time assuming that firms compete in quantities.Now, suppose that firm 1 has a capacity constraint of 1/3. That is, no matter what demand it gets, it can serve at most 1/3 units. Suppose that these units are served to the consumers who are willing to pay the most. Thus, even if it sets a price above that of firm 1, firm 2 may be able to sell some output. (c) Obtain the (residual) demand of firm 2 (as a function of its own…