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- Table 17-1Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below: Quantity(in gallons) Price Total Revenue(and Total Profit) 0 $60 $0 100 55 5,500 200 50 10,000 300 45 13,500 400 40 16,000 500 35 17,500 600 30 18,000 700 25 17,500 800 20 16,000 900 15 13,500 1,000 10 10,000 1,100 5 5,500 1,200 0 0 Refer to Table 17-1. If this market for water were perfectly competitive instead of…ECONOMICS Please Show Your Work With an Explanation This problem set explores what happens to pricing when we add network effects, which are a specific form of positive externality. You’ve invented a 3D fax machine. This cool technology is almost like a Star Trek teleporter. You can scan an object at one machine, which creates an exact copy at another 3D fax machine. It is so valuable that as more people use it, it becomes more valuable, and the price any given user is willing to pay increases in turn. Consider a scenario in which there are 12 possible users, who each value the fax machine at i*n, where i is the index of that user (from 1 to 12), and n is the number of other purchasing users. So, if no one buys the 3D fax machine, everyone values it at 0. However, as soon as one person buys the device, then the 12 possible users begin to value the product at 1, 2, … 12, respectively. If 2 people purchase, the 12 possible users’ valuations increase to 2, 4, … 24, and so on. Because…H1. The following table presents the valuations that 5 different consumers have for 2 different products. The production costs are $10 per unit of good A and $10 per unit of good B. The firm producing them can choose to price them independently or use a bundling strategy. What is the profit the firm will realize if it prices optimally?
- Exercise A.4 The demand in a market is given by Q = 10 - 0.1P. Production costs are given by C (Q) = 5Q2 + 10Q. Calculate market output, price, consumer surplus, and producer surplus in each of the following scenarios. Compare the economic efficiency in all three cases and represent graphically. (a) The market is supplied by a competitive industry. (b) The market is supplied by a monopoly. (c) The market is supplied by a monopoly that practices first-degree price discrimination.1. Suppose a logging company cuts trees from a local wood, but that nearby homeowners use the woods for hunting deer, and that the cutting of trees decreases the amount of deer the homeowners can catch. Demand for the timber is given by P= 100 – X, and the logging company's (one of many, so market outcome is P = MPC), marginal costs of cutting down the trees is MPC - 4X. Suppose that once we include the damage done to the homeowners, the marginal social costs are determined to be MSC = X + 10. a. Suppose the logging firm owns the woods and logs all they want. How much do they produce? b. What would be the total value of the damage done to the homeowners in this case? What is the efficient level of production? с. d. What is the maximum amount (total) the homeowners would be willing to pay the logging firm to decrease production to the efficient level. What is the minimum amount (total) the firm would be willing to accept to decrease production to the efficient level? c. f. What will be…Exercise A.9 In a market only two firms produce a homogeneous good. You work on one of them and are tasked with drawing up the production strategy for the coming year. The two companies in the market have the same information and the objective of both is the maximization of their profit. You know: the inverse market demand curve of the good: P(Q)=200-2Q where Q = q₁ + q₂ , the function that represents the costs of your company and the rival company: C(qᵢ) = 20qᵢ (for i=1, 2), and the data in the following table, with the optimal decisions according to the different types of competition:C(qᵢ) = 20qᵢ and the data in the following table, with the optimal decisions according to the different types of competition: q1 q2 P Bertrand 45 45 20 Cournot 30 30 80 Collusion 22,5 22,5 110 a) What is more in your company's interest to compete or cooperate with the rival company? Keep in mind that explicit collusion agreements are illegal, so each…
- Assume that consumers value a high quality piece of furniture at 5000 and a bad quality one at 3000. Assume that producing a bad quality piece of furniture costs the manufacturer 3500 and producing a high quality one costs 5000. . A) If the manufacturer is a monopolist, what will be the equilibrium sales prices on this market? B) How would your answer change, if the cost of producing a low quality piece of furniture went to 2900?Exercise A.4 The demand in a market is given by Q = 10 – 0.1P. Production costs are given by C (Q) = 5Q2 + 10Q. Calculate market output, price, consumer surplus, and producer surplus in each of the following scenarios. Compare the economic efficiency in all three cases and represent graphically. (a) The market is supplied by a competitive industry. (b) The market is supplied by a monopoly. (c) The market is supplied by a monopoly that practices first-degree price discrimination.Suppose that the demand curve for movies for college students is Q, = 80 - 1.00p 100 and for other town residents is 90- 80 Q2 = 20 - 0.25p. 70- The town's total demand curve is 60 50- E 40- 30- 20 60 Q, Movies 20 40 80 100 120 System Preferences www 1 tv 30 MacBook Air DII DD 80 F10 F9 F8 esc F7 F5 F6 F1 F2 F3 @ 23 $ 2 3 4 5 7 9 1 Q W R Y U P. Price per movie * CO
- Suppose, in a small city, a large share of the supply of COVID vaccine comes from USA and UK. Suppose that the marginal cost of vaccine is constant at $2 per vaccine and the demand for vaccine is described by the following schedule: Price ($) Quantity 70 5 4 80 3 90 100 1 110 a. If there were many suppliers of vaccines, what would be the price and quantity? b. If there were only one supplier of vaccines, what would be the price and quantity? [Hint: profit]1. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 - 2p Qy = 60 - 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker’s neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker’s neighbors. (a) Explain why the public supply curves differ from the private supply curves, and how this represents the externality from second-hand smoke. Highlight the area(s) of your diagram that represents a social loss. (b) Calculate the social loss for both. (c) Suppose the government decides to pursue a Pigouvian solution to eliminate social loss. What's amount of tax or subsidy would the government…1. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 - 2p Qy = 60 - 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker’s neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker’s neighbors. (a) Plot the private demand curve and private supply curve for both cigarettes on separate axes. (b) What is the privately efficient quantity demand of both cigarettes? (c) Add the public supply curves to the graphs you plot in (a). (d) What is the socially efficient quantity demand of both cigarettes?