"Let Q =S[n-2(PAP)] be the demand for a firm product in a monopolistic competition market, where P is the firm sprice, AP is average price in the industry and n is the number of firms in the industry. Suppose S = 1440 is Home marketsize; S = 2560 is Foreign market size. Suppose firms are symmetric in each country. Home s firms have a total cost C= 20 + 4Q and Foreign s firms have a total cost C = 20 + 5Q. The equilibrium number of firms at Home underautarchy is: "68101012

The key steps are: Set up the demand function:Q = S[n - 2(P - AP)] Where:Q = DemandS = Market size…

Answered: "Let Q =S[n-2(PAP)] be the demand for a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Monopolists, unlike competitive firms, have some market power. A monopolist can increase price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Economies of Scale Scenario In the natural gas industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the…
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Give step by step answer de student question Time Left : 01:58:56 Student question Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=400−QA−QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA=1,500+110QA+QA2 TCB=1,200+40QB+2QB2 Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at $ . Similarly, Company B will produce units and sell at $ . At the optimum output levels, Company A earns total profits of $ and Company B earns total profits of $ . Therefore, the total industry profits are $ . At the optimum output levels, the marginal cost of Company A is $ and the marginal cost of Company B is $ . The following…
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Assume an oligopolist confronts two possible demand curves for its own output, as illustrated below. The first (A) prevails if other oligopolists don't match price changes. The second (B) prevails if rivals do match price changes. Price (dollars per unit) 19- 17 Demand B 15- Demand A 13- 11. 8 10 12 14 16 18 20 Quantity (units per period) (a) By how much does quantity demanded increase if price is reduced from $11 to $9 and Instructions: Enter your responses rounded to the nearest whole number. (i) Rivals match the price cut? (ii) Rivals don't match the price cut? (b) By how much does quantity demanded decrease when price is raised from $11 to $15 and Instructions: Enter your responses rounded to the nearest whole number (do not include negative signs). (i) Rivals match the price hike? (ii) Rivals don't match the price hike?
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Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200-QA - QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA = 1,500 + 55QA + Q₁² Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at Similarly, Company B will produce At the optimum output levels, Company A earns total profits of $ total industry profits are $ At the optimum output levels, the marginal cost of Company A is $ Cournot Equilibrium Company A Company B Total Industry Selling price The following table shows the long-run equilibrium if the firms act independently, as in the Cournot model (i.e., each firm assumes that the other firm's output will not change). Total industry output Price Output…

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