Hi there just looking for the answer to 3C, using information provided from first picture. 3. In our third setup, there are four firms. Two firms who are identical with eachother produce type () cars. Two other firms that are identical with each other(but not with the first two) produce type 1 cars. Each firm maximises profitsgiven the output levels of the other three firms. The originally specifieddemand functions, (1), still apply to each type of car, and the originallyspecified cost functions, (2), still apply to individual firms. For example, iffirms A and B produce type 0 cars, and firms C and D provide type 1, thenQo = qA + qB and Q1 = qc + qp and the cost functions are:CA(q4) = 50qA, CB(qB) = 50qB, Cc(4c) = 20qc, Cp(qp) = 20qp-(a) Write down a profit expression for a representative firm providing typeO cars, and the profit expression for a representative firm providng type1.(b) Take first-order conditions(c) What would the tax rates To, n have to equal, in order for the equi-librium quantities Qo, Q1 to be the same as the values you found inquestion 1(d)? Feel free to assume that two identical firms producing atype of car, will provide the same amount as each other. There are two types of car, distinguished by how fuel eficient they are. TypeO is the less fuel efficient type, and type 1 is the more fuel efficient. The inversedemand curves for the two types of car are:Po = 250 – Qo – Qı/2, P = 120 – Q1 – Qo/2.(1)Cost functions areCo(Qo) = 50Q0, C:(Q1) = 20Q1(2)

In the context of economics and business, profit maximization refers to the process by which a…

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maximises profits

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Hi there just looking for the answer to 3C, using information provided from first picture.

3. In our third setup, there are four firms. Two firms who are identical with each
other produce type () cars. Two other firms that are identical with each other
(but not with the first two) produce type 1 cars. Each firm maximises profits
given the output levels of the other three firms. The originally specified
demand functions, (1), still apply to each type of car, and the originally
specified cost functions, (2), still apply to individual firms. For example, if
firms A and B produce type 0 cars, and firms C and D provide type 1, then
Qo = qA + qB and Q1 = qc + qp and the cost functions are:
CA(q4) = 50qA, CB(qB) = 50qB, Cc(4c) = 20qc, Cp(qp) = 20qp-
(a) Write down a profit expression for a representative firm providing type
O cars, and the profit expression for a representative firm providng type
1.
(b) Take first-order conditions
(c) What would the tax rates To, n have to equal, in order for the equi-
librium quantities Qo, Q1 to be the same as the values you found in
question 1(d)? Feel free to assume that two identical firms producing a
type of car, will provide the same amount as each other.

There are two types of car, distinguished by how fuel eficient they are. Type
O is the less fuel efficient type, and type 1 is the more fuel efficient. The inverse
demand curves for the two types of car are:
Po = 250 – Qo – Qı/2, P = 120 – Q1 – Qo/2.
(1)
Cost functions are
Co(Qo) = 50Q0, C:(Q1) = 20Q1
(2)

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