Suppose that the inverse demand for a downstream firm is P = 150 - Q. Its upstream division produces a critical input with costs of CU(Qd) = 5(Qd)2. The downstream firm's cost is Cd(Q) = 10Q. When there is no external market for the downstream firm's critical input, the downstream firm should produce:
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Suppose that the inverse demand for a downstream firm is P = 150 - Q. Its upstream division produces a critical input with costs of CU(Qd) = 5(Qd)2. The downstream firm's cost is Cd(Q) = 10Q. When there is no external market for the downstream firm's critical input, the downstream firm should produce:
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- Suppose that the inverse demand for a upstream firm is P = 150 - Q. It also produces a critical input with costs of CU(Qd) = 5(Qd)2. The downstream firm's cost is Cd(Q) = 10Q. When there is no external market for the downstream firm's critical input, the marginal revenue for the upstream firm is: A. MRd(Q) = 140 2Q. B. MRd(Q) = 150 - Q. C. MRd(Q) = 140 - Q. D. MRd(Q) = 150 - Q. E. None of the aboveNorthside Social (NS) sells cups of coffee and amazing breakfast sandwiches. The current price of a cup of coffee is $3.00 and the current price of an amazing breakfast sandwich is $8.00. At those prices, NS sells 1000 cups of coffee and 200 breakfast sandwiches daily. NS faces a constant marginal cost for each cup of coffee of 50 cents and the constant marginal cost of breakfast sandwiches is $2. NS increases the price of coffee 5%, to $3.15. After the price increase, NS sells 900 cups of coffee, a decrease of 10% in cups of coffee. Assuming the above, what if NS also changes the price of breakfast sandwiches from $8 to $10 (a 25% increase in price) and that the number of breakfast sandwiches sold decreases from 200 to 180 (a 10% decrease in quantity). Which of the following is true? A) Coffee profits and breakfast sandwich profits increase.B) Coffee profits decrease by more than breakfast sandwich profits decrease.C) Coffee profits decrease by more than breakfast sandwich profits…In a fishery the long-run harvest function (harvest volume) isH(E) = aE - bE2, with a, b representing positive constants and E is fishing effort.Total cost is TC(E) = CE, with e being the unit cost of effort.Total revenue is TR(E) = pH(E), with p being the constant price of fish.a) Find the open-access equilibrium values of effort and harvest. b) Find the fishing effort that maximizes resource rent, EvEy, and the corresponding harvest,HMEY. c) Find the fishing effort that maximizes sustainable yield (harvest), EMsy. Answer only sub parts b and c.
- A grape grower with a vineyard in the Edna Valley and in the Carneros appellation in Sonoma/Napa has a contract to produce 18 tons of pinot noir grapes for Gallo. The current allocation of the 18 tons results in a marginal cost of production in the Edna Valley vineyard of $800 (MCev = $800) and a marginal cost of production in the Carneros vineyard of $1200 (MCc = $1200). Explain whether the grower should move one ton of production from the Edna Valley to Carneros or vice versa. Make sure to provide a clear explanation of the outcome consistent with the idea of the equimarginal principle. Make sure to use the correct terms and units.The market for smart thermostats has grown increasingly competitive. Producers of smart thermostats all rely on the same technology and face the same costs. The cost function for a smart thermostat producer is given by the following function: c(y)=-10y+2003 where y stands for the number of smart thermostats produced and sold in a month. 2nd attempt Suppose the market demand for smart thermostats in any month is given by QD = 305 - p. In the long-run equilibrium, we would expect to find firms in the industry. See HintA firm operates in a pure competition market whereby the market price for a product, product A, is currently $15.This firm has an output of Q and faces a total cost curve: TC =1/3Q^3 − 6Q^2 + 44Q, and the resultingmarginal cost curve is given: MC = Q^2- 12Q + 44.It is required that the firm has an output of at least 5.(i) What is the maximum profit of the company in the short run? (ii) At the price of $15, what is the break-even point?
- 2.4 Water is produced and sold by the government. Demand for water is represented by the linear function Q=50-2P. The total cost function for water production is also a linear function: TC(Q)= 100+ 100. You will also need to work out both the average cost of production, denoted by AC(Q), equal to the total cost of producing a quantity of output divided by that quantity of output, TC(Q)/Q, and the marginal cost of production, denoted by MC(Q), which is the additional cost incurred to produce one more unit. a. What fee should the government charge per unit of water in order to reach the efficient allocation? b. How much should it charge if it wishes to maximize profit from the sale of water? C. What is the value of the efficiency loss that results from charging the price in part b rather than the price determined in part a?In a fishery the long-run harvest function (harvest volume) is H(E) = aE - bE2, with a, b representing positive constants and E is fishing effort. Total cost is TC(E) = CE, with e being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish.a) Find the open-access equilibrium values of effort and harvest.b) Find the fishing effort that maximizes resource rent, EvEy, and the corresponding harvest, HMEY.c) Find the fishing effort that maximizes sustainable yield (harvest), EMsy. d) Explain why higher levels of effort (E) beyond a certain point are associated withreductions in long-run total revenue (TR).Explain why it generally is not efficiency- maximizing for society to supply the level of fishing effort that maximizes the sustainable yield.In a fishery the long-run harvest function (harvest volume) is H(E) = aE – bE², with a, b representing positive constants and E is fishing effort. Total cost is TC(E)= cE, with c being the unit cost of effort. Total revenue is TR(E) = pH(E), with p being the constant price of fish. Find the fishing effort that maximizes resource rent, EMEY, and the corresponding harvest, HMEY- Find the fishing effort that maximizes sustainable yield (harvest), EMSY-
- A price-taking firm in a competitive industry of a good that is continuously divisible (like sand) has a total cost function TC(Q) = 3.5Q^2 + 100Q + 500. The market price for the good is p = $240. a: Carefully write out this firm’s profit maximization problem, using the particulars of thisproblem. b: Give the marginal condition (equation) that characterizes the solution to this problem. Solvethis condition for the firm’s optimal quantity Q*. c: Calculate the firm’s maximized profit. d: On a graph with quantity on the horizontal axis, neatly plot the marginal revenue curve andmarginal cost curve. Show Q* on your graph. e: Label areas on your graph using a, b, c, etc. and indicate the areas that correspond to totalrevenue and variable cost.Suppose the profit maximizing firm sells the same good in two individual markets that it is able to keep separate. Since the price elasticity of demand is different in each market, the firm recognizes that rather than charge all customers the same price, it can increase profits by charging different prices in each of the two markets. The demand equations for each market are shown below: Market 1 P=25-2Q Demand The firm's Total Cost Function is: TC=5Q a) What is the optimal output in Market 1? b) What price will be charged in Market 1? Market 2 P=15-Q c) what is the optimal output in market d) what price will be charged in market e) what is the firm's total profit f ) illustrate your answerA small tie shop finds that at a sales level of x ties per day its marginal profit is MP(x) dollars per tie, where MP(x) = 1.60 + 0.10x – 0.0012x². Also, the shop will lose $70 per day at a sales level of x = 0. Find the profit from operating the shop at a sales level of x ties per day. P(x) =