In a given market the inverse demand function is P = 170-Q per year. The interest rate is r = 0.05 and the cost structure of a firm is given by C(q) = 80 q. Now assume that originally there was a Cournot duopoly in the market (with equal costs) and that it would be too costly for the research institute to enter the market. Answer the following: If the research institute sells an exclusive license at a fixed annual fee L to firm 1 (with the threat of going to the other firm if firm 1 rejects the offer), then • The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 400 respectively. O The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 900 respectively. The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 900 respectively. O The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 400 respectively.

In a given market the inverse demand function is P = 170-Q per year. The interest rate is r = 0.05 and the cost structure of a firm is given by C(q) = 80 q. Now assume that originally there was a Cournot duopoly in the market (with equal costs) and that it would be too costly for the research institute to enter the market. Answer the following: If the research institute sells an exclusive license at a fixed annual fee L to firm 1 (with the threat of going to the other firm if firm 1 rejects the offer), then • The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 400 respectively. O The optimal annual fee is 1,600 and profits for firm 1 and 2 are 900 and 900 respectively. The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 900 respectively. O The optimal annual fee is 2,100 and profits for firm 1 and 2 are 400 and 400 respectively.

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

One of the market structure that is best characterized by monopolistic competition is pizza market. Say Classico's Pizza is one of such producers in the local market. The demand for Classico's Pizza is: Qd = 225 - 10P and Classico's cost function is: C(Q) 0.15Q2. Determine Classico's long run level of output and price
In the mobile phone market, Samsung and Apple constitute a duopoly in the production of devices.The American firm has the following demand q(a) = 10 - p(a )+ 0.25p(s), and the Korean firm, q(s) = 20 -p(s)+ 0.5p(a). Because both firms assembly their devices in China, their cost structure is the same andequal to ?(q) = 10q, answer the following questions.a) What would be the equilibrium (quantity, price, and profit) in this market, and interpret youranswer.b) If they decide to form a cartel, what are the new quantities, prices, and profits? NB.a=apple and s=Samsung
Consider a Leader-Follower duopoly, the firms face an (inverse) demand function: Pb = 530 - 17 Qb.The marginal cost for firm 1 (The Leader) is given by mc1 = 12 Q.The marginal cost for firm 2 (The Follower) is given by mc2 = 9 Q. (Assume firm 1 has a fixed cost of $ 157 and firm 2 has a fixed cost of $ 113 .) How much DWL is created by the Leader-Follower industry structure ?
Consider an industry that consists of 4 firms, all competing over the same market, given by the following demand equation: P=80-3Q All firms have the same Total Cost Function, given by: TC₁=10q,+2q Suppose the firms decide to collude and voluntarily restrict output and raise price, in order to increase profits. a) What price will be charged by the members of the cartel? Assume the head of the cartel is fair and distributes output q, equally among the 4 firms (since they have identical costs). b)What is the output of each individual firm? c) What is each individual firm's profit? We know that there is a built-in incentive for cartel members to cheat on the cartel. If, as a result, the cartel breaks down: d) What price will be charged in the market? e) Assuming each firm captures an equal share of the market, what now is each firm's output, q? f) What now is individual firm profit? g) Illustrate your answer
Hand written solutions are strictly prohibited
Consider the following model of Cournot competition with fixed cost. There are two identical firms, and the inverse demand function is given by 5. P(q1, 42) 19 – (q1 + 92). Firms have constant marginal cost, but any firm operating in this market (that is, q; > 0) must pay a license fee F. In particular, firm i's cost function is if qi = 0 c:(4;) = { F+4 if qi > 0. (a) Derive the firms' best response functions. (b) For what values of F, if any, will there be a symmetric (pure) Nash equilibrium in which firms produce a positive quantity? What is the Nash equilibrium in that case? (c) For what values of F, if any, will both firms shutting down be the Sy anmetric (pure) Nash equilibrium?
You are the manager of Taurus Technologies, and your sole competitor is Spyder Technologies. The two firms' products are viewed as identical by most consumers. The relevant cost functions are C(Q) = 4Q;, and the inverse market demand curve for this unique product is given by P= 100 -2 Q. Currently, you and your rival simultaneously (but independently) make production decisions, and the price you fetch for the product depends on the total amount produced by each firm. However, by making an unrecoverable fixed investment of $200, Taurus Technologies can bring its product to market before Spyder finalizes production plans. (Assume Taurus Technologies is the leader in this scenario.) What are your profits if you do not make the investment? $ What are your profits if you do make the investment? Instructions: Do not include the investment of $200 as part of your profit calculation. $ Should you invest the $200? O Yes - the cost of establishing the first-mover advantage exceeds the benefits.…
Consider the Bertrand model and answer the question below related to the content. Assume that each firm in the Bertrand Duopoly model can only choose non-negative integer quantities: 0, 1, 2, ... . Assume the demand is Q(P)=10-P and the marginal cost is 0 for each firm. Given this information, which of the following is FALSE? [Hint: Check values of profit functions.] A. If firm 2 sets price equal to 1, then the best response of firm 1 to this price is 1 B. If firm 2 sets price equal to 4, then the best response of firm 1 to this price is 4 C. If firm 2 sets price equal to 2, then the best response of firm 1 to this price is 1
There are two ice-cream parols on a beach. The dayly demand for ice-creams is given by Q = 3079 - 3p. The average variable cost of an ice-cream is 70, while the rent of the place is 966. How many ice-creams is the 'Leader' company selling if the two ice-cream stands operate as Stackelberg duopolists? (Please use 2 decimals in your answer.)
The market demand in a homogeneous-product Cournot duopoly is P = 100 - 2Q, where Q = Q1 + Q2 (Firm 1 and Firm 2), and the costs functions for each firms are: TC1 = 12Q1 and TC2 = 20Q2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Complete the following table. Q1 Q2 P Profits F1 Profits F2 F1 cheats w/ QDC, F2 colludes F1 cheats w/ QBRF, F2 2 colludes
show all working.
(b) Consider two firms, 1 and 2 , operating in a monopolistic competitive market. The cost functions of the firms are: TC_(1)=20+20 Q and TC_(2)=80+80Q, respectively. Would it be rational for both firms to compete in the world market, given the market demand curve of Q=100-P, and they have to bear a trade cost of $30 per unit? Explain with the help of a diagram. please give answer with compleete steps and diagram.