There are two firms in a market, where quantities are the strategic variable within two periods. In each of the two periods t = 1; 2 the inverse demand function Pt is given by Pt (y) = 5-y. The cost function of firm i is given by C=3+2y, where i=1,2. In the first period firm1 is a protected monopolist. Profits of a firm can be interpreted as the sum of its profits in each period. In order to maximize their profits, firms set quantities. (i) (ii) Define the monopoly solution. Firm1 must choose the same quantity in each period y = y due to the technological restrictions. Considering y firm2 thinking to enter in period 2. Define the profit maximizing y if yt is given. (iii) Suppose that firm 2 will enter in the second period. What and quantity will firm 1 have? What is the equilibrium P

There are two firms in a market, where quantities are the strategic variable within two periods. In each of the two periods t = 1; 2 the inverse demand function Pt is given by Pt (y) = 5-y. The cost function of firm i is given by C=3+2y, where i=1,2. In the first period firm1 is a protected monopolist. Profits of a firm can be interpreted as the sum of its profits in each period. In order to maximize their profits, firms set quantities. (i) (ii) Define the monopoly solution. Firm1 must choose the same quantity in each period y = y due to the technological restrictions. Considering y firm2 thinking to enter in period 2. Define the profit maximizing y if yt is given. (iii) Suppose that firm 2 will enter in the second period. What and quantity will firm 1 have? What is the equilibrium P

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider a market with the following demand function: P = 100 – Q. There is a monopolist firm with the following total cost function: CM = 60 + 1OQM There is potential firm that plans to enter to the market, and its total cost function is as follows: Cp = 100 + 20QM. What is the limit price the monopolist firm could set? (Note: Assume Q-setting, Cournot model.) а.50 b.45 С.40 d.55
Assume a single-price monopolist has an inverse market demand curve given by P(Q)=300-0.5Q, and has a cost curve: C(Q)=125+20Q+0.5Q2. We already know that Monopolist will provide 140 units, Economic profit is 19475, and Economic Rent is 190. If the impact of a 35% ad valorem tax imposed on the consumers in the market. Then: Q1: What is the equilibrium quantity will be sold in the after-tax equilibrium? Q2: What are the economic rents of the monopolist?
In first-degree price discrimination, a monopolist manipulates market price by altering the quantity of product supplied to that market. Select one: True False A natural monopoly arises when the firm's technology has economies of scale small enough for it to supply some of the markets at a lower average total production cost than is possible with more than ane firm in the market. Select one: True False If a firm's production function is defined as, y=f(x;,X2Xa), the firm's profit is; II(x,,x, ,x,) = p(y)-w,x, - w,x, - w,x. Select one: True False
A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 90 - Qa' and the Japanese inverse demand function is P₁ = 80 - 2Qj, where both prices, På and p₁, are measured in dollars. The firm's marginal cost of production is m = $25 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $ (round your answer to the nearest penny) The equilibrium price in the U.S. is $. (round your answer to the nearest penny)
A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 120-Q₂. and the Japanese inverse demand function is P₁ = 100-2Q₁ where both prices, p, and p,, are measured in dollars. The firm's marginal cost of production is m = $20 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $. (round your answer to the nearest penny)
Consider a firm that has one factory, but can sell its product in two observably different markets, engaging in third-degree price discrimination. You may assume that the good produced is continuously divisible (like ethanol). The firm has a monopoly in market 1 and faces market demand curve Q1(P) = 100 – 2P and the firm also sells its product in market 2 which is competitive and has market price P2 = $30. The firm has cost function C(Q) = 0.25Q2 with marginal cost equal to MC(Q) = 0.5Q, where Q = Q1 + Q2 is the total quantity it produces: Q1 is the quantity to be sold in market 1 and Q2 is the quantity to be sold in market 2. a) Write out the firm’s profit maximization problem. b) Give the marginal conditions (equations) that a solution to the profit maximization problem satisfies. c) Solve for the firm’s optimal quantities to sell in each market. d) Give the price that the firm optimally charges in each market
A monopolistic producer of two goods has a total cost function TC = 5Q1+10Q2 and a total revenue TR = 50Q1- Q1² – 2Q2Q1+100Q2– 4Q22 Using the same functions as given in Question 1, now consider when the firm's total costs are fixed at RM200. ii) Using the bordered Hessian, prove that the firm's profit is at a maximum-
A monopoly can use one of two alternative technologies. One technology requires 10 units of capital and 11 units of labor for each unit of output. The other technology requires 20 units of capital and 2 units of labor for each unit of output. The price of capital, r, and labor, w are both $1 per time period. This means the cost function cor- responding to the first technology is C1(y) = 2ly and the cost function corresponding to the second technology is C2(y) = 22y. The demand function is given by: P(y) = 100 -y The unregulated monopolist will clearly use the first technology since it allows produc- tion of any output level y at a lower cost. %3D %3D (a) Calculate the monopoly's output, price, and profit if it uses the first technology Consider a rate of return regulation which allows the monopoly to take as profit only $0.1 per each $1 of capital. (b) What would be the output, price and profit under each technology?
"Tiffany" is a retailer monopolist who makes a unique product called the "diamond ring" that requires exactly one diamond as input, which is sold by a wholesaler monopolist, the "Diamond Corporation". Diamond Corporation faces a marginal cost of £60 per unit of input (this is also the firm's average cost). Assume that "Tiffany" faces the following inverse demand curve for diamond rings: Pt 320 – Qt where Pt is the price of red diamond rings in pounds per unit and Qt is the quantity of diamond rings offered for sale by "Tiffany". Similarly, Diamond Corporation charges a price, Pa, for the inputs in £ per unit and Qa is the quantity of inputs sold by Diamond Corporation. a) Derive the profit-maximising price and output for both firms, assuming that the two monopolists act as independent profit-maximising companies. Calculate profits of each firm. Use a clear diagram to illustrate your answers to explain your calculations. b) Now assume that the two firms merge. Calculate the post-merger…
Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200-QA - QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA = 1,500 + 55QA + Q₁² Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at Similarly, Company B will produce At the optimum output levels, Company A earns total profits of $ total industry profits are $ At the optimum output levels, the marginal cost of Company A is $ Cournot Equilibrium Company A Company B Total Industry Selling price The following table shows the long-run equilibrium if the firms act independently, as in the Cournot model (i.e., each firm assumes that the other firm's output will not change). Total industry output Price Output…
I need help working through this problem
Consider the following demand functions and total cost function faced by a monopolist where Q is output, PL is the price based on low demand, and PH is the price based on high demand. Q = 50 – 0.25PL Low Demand Function Q = 200 – 0.50PH High Demand Function TC = 2,500 + 50Q + 0.50Q2 Total Cost Function Suppose that there is a 75% chance of low demand and a 25% chance of high demand. 1) Determine the monopolist’s profit maximizing level of output. 2) Determine the monopolist’s expected profit maximizing price.