! 5. Suppose a firm has fixed cost f of setting up the production line and variablecost e per unit of finished product. A number of firms can enter the market, and eachfirm has unique product imperfectly substitutable with other products. The demand forindividual firm's product is given byEPp?where p, is the price charged by this firm and q is the quantity sold. P is the overallprice index, which depends on the umber of firms n and prices all the firms charge. Itis equal to P = EP and each individual firm takes its level as given when makingpricing decision. Firms maximize profits and the etry to the market is free. Find theequilibrium number of firms on this market as a function of parameters f, c, o and E.Remark 1: Note that EP.q = EP = E, thus, E represents overall expenditurej=iof consumers for the industry products.Remark 2: One can derive this demand function if one assumes that consumer'spreferences are described by the Constant Elasticity of Substitution utility function:U =with o being the elasticity of substitution between goods.i=1

Profit maximization is an essential idea in economics and commercial enterprise, representing the…

Answered: mperfectly substitutable

Business

Economics

mperfectly substitutable

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: explain how the government use the concept of elasticity to regulate it prices

A: Meaning of Price Elasticity of Demand: The price elasticity of demand refers to the situation…

Q: What is meant by accomodating items?

A: We know well that in autonomous transactions there occur deficits or surplus which are to be covered…

Q: What a monopoly's ATC , Demand, MR and MC Looks like if the monopoly is operating with loss.

A: A monopoly firm is the sole supplier of the good or service in the market and therefore a monopoly…

Q: how can develop a model of elastic in demand. Example please

A: Elastic demand can be defined as the impact of price on the demand. When the price impacts the…

Q: MCQ2, Friday March 25, 11am Time Limit: 0:50.00 Time Let0:18.54 Namh Ryan Altenpt 1 Page 2 Page 3:…

A: Meaning of Market: The term market refers to the situation under which the producers or the…

Q: a. The price elasticity of demand for cigarettes is estimated to by 0.5. A pack currently costs $10.…

A: In order to decrease the quantity, the price of a normal good is increased.

Q: Price, marginal venue, marginal cost, average total cost $35 ATC 29 26 MC 160 220 250 300 Quantity…

A: The profit is maximized where the MR = MC.

Q: QUESTION 3 You are considering subscribing to ESPN+. You are willing to pay up to $83 per year for a…

A: The difference between the price that a consumer is willing to pay for a good or service and the…

Q: TC 50 TR 40 30 otal cost (dollars per day)

A: Economic profit is zero when total revenue and total cost are equal to each other. Hence, there is…

Q: how do you calculate equlibrium price and quantity?

A: Calculation of equilibrium price and quantity.

Q: A producer supplies 400 units of a good at 10 per unit price last elasticity of supply is 2 how many…

A: Price elasticity of supply is the measure of sensitiveness of quantity supplied due to the change in…

Q: 3. If the price elasticity of demand is equal to 0.5, is demand elastic, inelastic, or unitary…

A: 3. When the price elasticity of demand is equal to 0.5 , then the Elasticity of demand is Ed < 1…

Q: Which of the following would most likely be an example of elastic supply? Choose all that apply.…

A: 1. According to the law of supply, there exist a direct relationship between supply and price. This…

Q: The table shows a sample of prices and the quantity sold by a monopolist What is the price…

Q: nd ID! But it is also so you can get some pi The diagram shows the market for Film circa 1925, when…

A: A monopoly is a market structure that is characterized by: full control over the market, a single…

Q: What is demand? (

A: Demand is a powerful economic factor because it drives businesses to produce, develop supplies, and…

Q: Explain what supplier-induced demand is.

A: Demand is the quantity of an item or service that consumers buy at various prices during a specific…

Q: 2) A monopoly faces a demand elasticity of -10 and marginal cost of $2, what is the optimal monopoly…

A: Ed = -10 MC = 2 P = ?

Q: Figure Z 430 220 100 40 16 Price 2 n Supply 20 Quantity Refer to Figure Z. When is this supply curve…

A: Elasticity measures the percentage change in quantity due to percentage change in price. The supply…

Q: Q4 The market demand for laptops in a certain city of Ontario is shown in the following table.…

A: The total of all individual commodity demands made by buyers in the market is known as market…

Q: Are market supply curvy typically more elastic in the short run or in the long run

A: Market supply curves tend to be more elastic in the long run compared to the short run. In the short…

Q: The elasticity of demand for apples is estimated to be -1.75. If the price of apples falls by 10%,…

A: Price elasticity of demand is a measure of the responsiveness or sensitivity of the quantity…

Q: What is the dead weight loss? a.The loss in welfare due to the monopoly producing a LARGER amount…

A: A dead-weight loss happens when demand and supply are not in balance or in equilibrium, which…

Q: What is the deadweight loss associated with monopoly? A. The loss in consumer surplus due to high…

A: Deadweight loss in economics refers to a loss of financial efficiency that can happen when the…

Q: 1. A regulator is charged with determining the length of a patent on new intellectual property, a…

A: Creations, works of art and literature, inventions, symbols, pictures and brands used in commerce…

Q: PRICE (Dollars per bike) 500 450 400 350 300 250 - 200 150 100 50 MC 0 0 50 I AC MR Demand 100 150…

A: Monopolistic competition occurs when a large number of small firms produce products that differ only…

Q: Refer to the figure below: Price or Cost (dollars per unit) Po MC A 0 ATC MC a. an unregulated…

A: Monopoly is a form of imperfect competition. There is one firm. The number of consumers is high.…

Q: Enplain the lImportance of the concept of price, elasticuty diagram for each to support your Income…

A: Meaning of Price Elasticity of Demand: The price elasticity of demand refers to the situation…

Q: The diagram bow depts the demand curve (D), the marginal revenue curve (MR), the marginal cost curve…

A: In a monopoly market structure, There exists a single seller. There exists high barriers to entry…

Q: Problems and Applications Q8 nry Potter owns the only well in town that produces clean drinking…

A: Marginal revenue is the additional revenue generated by selling one additional unit of a product or…

Q: what will happen to the equilibrium of mobile phones of government announces higher sales taxes on…

A: Imposition of sales tax results in leftward shift of the supply curve.

Q: When was GATT created?

A: International trade is the process of the exchange of goods and services between different trading…

Q: An unregulated natural monopoly bottles Elxir, a unique product with no substitutes. The monopoly's…

A: A monopoly company is a business that holds exclusive authority over manufacturing and distributing…

Q: What are the goals of the Federal Trade Commission?List the ways in which the FTC affects marketing…

A: The Federal Trade Commission has been established by the government of the U.S. It is an independent…

Q: Who's bigger elasticity of market or individual?

A: Elasticity refers to the degree of responsiveness, i.e. how sensitive the quantity with respects to…

Q: (c) A discriminating monopolist is faced with the following price elasticities: e1-0.75 and What…

A: A discriminating monopolist charges different prices in different markets based on the price…

Q: Comment on the elasticity of oil demand and the effect of changes in supply on revenue of producers…

A: The price elasticity of demand measures the responsiveness in the quantity demanded of a commodity…

Q: When is supply said to be elastic?

A: Elasticity is a term used in economics to describe the degree to which the quantity desired or…

Q: is any physical good, service, or idea that satisfies a want or need, plus anything that in the eyes…

A: A sale is an action of giving a good of service in exchange for money. A test refers to evaluation…

Question

5. Suppose a firm has fixed cost f of setting up the production line and variable
cost e per unit of finished product. A number of firms can enter the market, and each
firm has unique product imperfectly substitutable with other products. The demand for
individual firm's product is given by
E
Pp?
where p, is the price charged by this firm and q is the quantity sold. P is the overall
price index, which depends on the umber of firms n and prices all the firms charge. It
is equal to P = EP and each individual firm takes its level as given when making
pricing decision. Firms maximize profits and the etry to the market is free. Find the
equilibrium number of firms on this market as a function of parameters f, c, o and E.
Remark 1: Note that EP.q = EP = E, thus, E represents overall expenditure
j=i
of consumers for the industry products.
Remark 2: One can derive this demand function if one assumes that consumer's
preferences are described by the Constant Elasticity of Substitution utility function:
U =
with o being the elasticity of substitution between goods.
i=1

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Profit maximization

VIEW

Step 2: Explain the equilibrium number of firms on this market as a function of parameters f, c, and E.

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 8 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

What is mean by ''high powered moeny'' H? What does the demand for H consits of? Who controls the supply H?
Read the article. How important are cellphones in our lives right now? Do you ever see them becoming a necessity? Explain.
Question 42 The case for drilling oil in ANWR is strengthened when the: O negative impact of drilling on the environment is greater. O elasticity of demand for oil increases. O price of oil is higher. O price of oil is lower.
2500-p The demand equation for a product is found to be q where p is the price of the product in dollars and q is the quantity. a. Find the price elasticity of demand when the price is $30. b. Is the demand elastic, inelastic, or unit elastic? How do you know? c. Based on your findings, should the company increase the price? Why or why not?
Table: Prices and Demand Quantity of Hats Demanded 0 1 2345699 7 8 Price per Hat $30 XHHNARY 28 26 24 22 20 18 16 14 (Ref 27-8 Table: Prices and Demand) Use Table 27-8: Prices and Demand. The New Orleans Saints have a monopoly on Saints logo baseball hats. The Saints sell at most 1 hat to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a hat is $18, and there are no fixed costs. How much is the Saints' profit at the profit-maximizing output? O a. $18 O b. $24 O c. $12 O d. $30
Typed plz and asap thanks I want quality solution please
e ap sep 0 ja ajaloo Purwas ap o Consider a town in which only two residents, Clancy and Eileen, own wells that produce water safe for drinking. Clancy and Eileen can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Tab Caps Lock Price (Dollars per gallon) 6.00 5.50 5.00 4.50 Esc is 81°F Sunny 4.00 3.50 3.00 2.50 2.00 1.50 1.00 ! 0.50 0 7 Q A Quantity Demanded (Gallons of water) 0 45 17 F2 8- @ Suppose Clancy and Eileen form a cartel and behave as a monopolist. The profit-maximizing price is $ gallons. As part of their cartel agreement, Clancy and Eileen agree to split production equally. Therefore, Clancy's profit is - C VE 2 W 90 135 S. 180 225 270 315 360 405 450 495 540 F3 0+ #M 3 Total Revenue (Dollars) 0 $247.50 $450.00 $607.50 $720.00 $787.50 $810.00 $787.50 $720.00 $607.50 E F4 BO $450.00 $247.50 0 D $ 4 F5 R F % 5 F6 D T F7 ^ 6 G 4- Y FB J+ & 7 per gallon, and the total…
19. A federal regulatory commission recently charged a nationwide chain store with pressuring manufacturers to supply toys exclusively to its stores. The federal regulatory commission's action is an example of which of the following? A. settling a labor dispute on behalf of workers B. preventing unfair competition in an industry C. fully inspecting products before shipment D. enforcing safety standards for consumers
2.The shoe company in Marikina have decided to increase to 18% per pair of shoes to due to its high operating and production costs. The unit cost is 599.00. The original and new demand of pairs of shoes reached 500 to 450 units respectively Calculate the price elasticity of demand, determine the type of elasticity and piot the graph of price elasticity.
Price ATC MC 20 18 16 15 MR Demand 15 18 20 25 Quantity
C. Assume that if electricity is supplied by competitive firms, the market price is 55 and the quantity supplied is 8 (‘000 KWHs)? What is the amount of the deadweight loss to society of producing electricity by monopolist Global Gas and Electric? (It is helpful to have a graphical illustration based on the data above so you could calculate easily the DWL. )
Can you show or explain how elasticity was calculated?