Student question Time Left: 00:09:02 Food manufacturers in the small island nation of Autarka have complained that the cost of cardboard, used to produce the packaging for their products, is too high. The food manufacturers claim that the price of cardboard in Autarka is much higher than in other countries. They allege that cardboard manufacturers are colluding to raise the price in Autarka. There are three firms that manufacture cardboard in Autarka: Arthur's Accoutrements, Boris' Boxes, and Carl 's Cartons. These firms contend that the relatively high prices in Autarka are due both to the small size of the market and to the fact that cardboard is too expensive to import by air or sea. Cardboard is a homogeneous good produced to industry standard specifications. The annual demand for cardboard in Autarka is given by the function, Q = 10,000,000 1,000,000P, where Q is the quantity demanded of cardboard for a given year, measured in square metres, and P is the price per square metre. The equipment for manufacturing cardboard is readily available to manufacturers around the world. Each year a manufacturer must ensure it has sufficient manufacturing capacity installed to produce its desire quantity of cardboard. The marginal cost of cardboard, inclusive of the cost of installing capacity, is $0.60 per square metre. The fixed cost of operating a cardboard manufacturing plant is $4,000,000 per year. At present, the market price of cardboard is $3.70 per square metre, with 6, 300,000 square metres being sold each year. For steps 7 and 8 you should assume that the three firms are engaged in Cournot competition. Profit function: See image attached below Best response function obtained from profit function below: QA = (9,400,000 - X)/2 • Step 7: Find the equilibrium quantity of the typical firm as a function of N, the number of firms in the market. • Step 8: Find the equilibrium price as a function of N, the number of firms in the market. Profit (7) Total Revenue (TR) Total Cost (TC) = [(10-04+x, 000, 000)Q4] - ($0.600A + $4,000,000) == 1 ■ Profit (π) = Total Revenue (TR) - Total Cost (TC) - = [(10 Q4+,000,000) QA] - ($0.60QA + $4,000,000)
Student question Time Left: 00:09:02 Food manufacturers in the small island nation of Autarka have complained that the cost of cardboard, used to produce the packaging for their products, is too high. The food manufacturers claim that the price of cardboard in Autarka is much higher than in other countries. They allege that cardboard manufacturers are colluding to raise the price in Autarka. There are three firms that manufacture cardboard in Autarka: Arthur's Accoutrements, Boris' Boxes, and Carl 's Cartons. These firms contend that the relatively high prices in Autarka are due both to the small size of the market and to the fact that cardboard is too expensive to import by air or sea. Cardboard is a homogeneous good produced to industry standard specifications. The annual demand for cardboard in Autarka is given by the function, Q = 10,000,000 1,000,000P, where Q is the quantity demanded of cardboard for a given year, measured in square metres, and P is the price per square metre. The equipment for manufacturing cardboard is readily available to manufacturers around the world. Each year a manufacturer must ensure it has sufficient manufacturing capacity installed to produce its desire quantity of cardboard. The marginal cost of cardboard, inclusive of the cost of installing capacity, is $0.60 per square metre. The fixed cost of operating a cardboard manufacturing plant is $4,000,000 per year. At present, the market price of cardboard is $3.70 per square metre, with 6, 300,000 square metres being sold each year. For steps 7 and 8 you should assume that the three firms are engaged in Cournot competition. Profit function: See image attached below Best response function obtained from profit function below: QA = (9,400,000 - X)/2 • Step 7: Find the equilibrium quantity of the typical firm as a function of N, the number of firms in the market. • Step 8: Find the equilibrium price as a function of N, the number of firms in the market. Profit (7) Total Revenue (TR) Total Cost (TC) = [(10-04+x, 000, 000)Q4] - ($0.600A + $4,000,000) == 1 ■ Profit (π) = Total Revenue (TR) - Total Cost (TC) - = [(10 Q4+,000,000) QA] - ($0.60QA + $4,000,000)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Student question
Time Left: 00:09:02
Food manufacturers in the small island nation of Autarka have complained that the cost of cardboard, used to produce
the packaging for their products, is too high. The food manufacturers claim that the price of cardboard in Autarka is
much higher than in other countries. They allege that cardboard manufacturers are colluding to raise the price in
Autarka. There are three firms that manufacture cardboard in Autarka: Arthur's Accoutrements, Boris' Boxes, and Carl
's Cartons. These firms contend that the relatively high prices in Autarka are due both to the small size of the market
and to the fact that cardboard is too expensive to import by air or sea. Cardboard is a homogeneous good produced to
industry standard specifications. The annual demand for cardboard in Autarka is given by the function, Q
= 10,000,000 1,000,000P, where Q is the quantity demanded of cardboard for a given year, measured in square
metres, and P is the price per square metre. The equipment for manufacturing cardboard is readily available to
manufacturers around the world. Each year a manufacturer must ensure it has sufficient manufacturing capacity installed
to produce its desire quantity of cardboard. The marginal cost of cardboard, inclusive of the cost of installing capacity, is
$0.60 per square metre. The fixed cost of operating a cardboard manufacturing plant is $4,000,000 per year. At
present, the market price of cardboard is $3.70 per square metre, with 6, 300,000 square metres being sold each year.
For steps 7 and 8 you should assume that the three firms are engaged in Cournot competition. Profit function: See
image attached below Best response function obtained from profit function below: QA = (9,400,000 - X)/2 • Step 7:
Find the equilibrium quantity of the typical firm as a function of N, the number of firms in the market. • Step 8: Find the
equilibrium price as a function of N, the number of firms in the market. Profit (7) Total Revenue (TR) Total
Cost (TC) = [(10-04+x, 000, 000)Q4] - ($0.600A + $4,000,000)
==
1
■ Profit (π) = Total Revenue (TR) - Total Cost (TC)
-
= [(10 Q4+,000,000) QA] - ($0.60QA + $4,000,000)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb41d7b5a-4302-48bc-93bb-48c36169f4db%2F39bc2d95-81a4-40d8-9f11-3a3ca41378a1%2F7zqrtio_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Student question
Time Left: 00:09:02
Food manufacturers in the small island nation of Autarka have complained that the cost of cardboard, used to produce
the packaging for their products, is too high. The food manufacturers claim that the price of cardboard in Autarka is
much higher than in other countries. They allege that cardboard manufacturers are colluding to raise the price in
Autarka. There are three firms that manufacture cardboard in Autarka: Arthur's Accoutrements, Boris' Boxes, and Carl
's Cartons. These firms contend that the relatively high prices in Autarka are due both to the small size of the market
and to the fact that cardboard is too expensive to import by air or sea. Cardboard is a homogeneous good produced to
industry standard specifications. The annual demand for cardboard in Autarka is given by the function, Q
= 10,000,000 1,000,000P, where Q is the quantity demanded of cardboard for a given year, measured in square
metres, and P is the price per square metre. The equipment for manufacturing cardboard is readily available to
manufacturers around the world. Each year a manufacturer must ensure it has sufficient manufacturing capacity installed
to produce its desire quantity of cardboard. The marginal cost of cardboard, inclusive of the cost of installing capacity, is
$0.60 per square metre. The fixed cost of operating a cardboard manufacturing plant is $4,000,000 per year. At
present, the market price of cardboard is $3.70 per square metre, with 6, 300,000 square metres being sold each year.
For steps 7 and 8 you should assume that the three firms are engaged in Cournot competition. Profit function: See
image attached below Best response function obtained from profit function below: QA = (9,400,000 - X)/2 • Step 7:
Find the equilibrium quantity of the typical firm as a function of N, the number of firms in the market. • Step 8: Find the
equilibrium price as a function of N, the number of firms in the market. Profit (7) Total Revenue (TR) Total
Cost (TC) = [(10-04+x, 000, 000)Q4] - ($0.600A + $4,000,000)
==
1
■ Profit (π) = Total Revenue (TR) - Total Cost (TC)
-
= [(10 Q4+,000,000) QA] - ($0.60QA + $4,000,000)
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