(a)
The market
(a)
Explanation of Solution
The market demand curve for Otters is given as
The marginal revenue of the market can be derived as follows:
The market marginal revenue is
By substituting the value of Q in the demand equation, the
Thus, the market demand curve can be illustrated as follows:
The monopoly output and price are 80 units and $60 per unit.
Imperfect competition: The imperfect competition is the market structure where there are many sellers selling the differentiated products and there will be information asymmetry in the market which provides some market control to the producers.
(b)
The output in the market by A.
(b)
Explanation of Solution
When firm J announces that half of the monopoly output would be brought by J, firm J would bring 40 units. By knowing this, the residual demand for A can be calculated as follows:
Inverse demand equation (Price) for firm A can be calculated as follows:
Thus, the marginal revenue curve of A will be
Thus, A's profit maximizing output would be 60 units.
(c)
Industrial output, price, and each seller's profit.
(c)
Explanation of Solution
The output by J is 40 units and the output by A is 60 units, which means that the total industrial output would be the summation of these two which is equal to 100 units. The price can be calculated by substituting the values of the two quantities in the demand function as follows:
Thus, the price of the market would be $50 per unit. Thus, the profit of each seller can be calculated as follows:
Similarly, the profit of A can be calculated as follows:
Thus, the profit of A is $1,800 and that of J is $1,200.
(d)
Industrial output, price, and each seller's profit.
(d)
Explanation of Solution
When firm J knows that the output brought by A is 60 units, the residual demand for the J can be calculated as follows:
Inverse demand equation (Price) for firm J can be calculated as follows:
Thus, the marginal revenue curve of J will be
Thus, J's profit maximizing output would be 50 units. The output by J is 50 units and the output by A is 60 units, which means that the total industrial output would be the summation of these two which is equal to 110 units. The price can be calculated by substituting the values of the two quantities in the demand function as follows:
Thus, the price of the market would be $45 per unit. Thus, the profit of each seller can be calculated as follows:
Similarly, the profit of A can be calculated as follows:
Thus, the profit of A is $1,500 and that of J is $1,250.
(e)
Cournot equilibrium in the economy.
(e)
Explanation of Solution
The market demand curve is
The marginal revenue of firm J can be calculated as follows:
Thus, the marginal revenue curve for J will be
The marginal revenue of firm A can be calculated as follows:
Thus, the marginal revenue curve for J will be
Similarly, A can be calculated as follows:
Thus, by substituting the reaction function of A in J the equilibrium output can be provided as follows:
Since A also faces the identical problem, the output of A will also be 53.33. Thus, the total output is 106.66 and this can be substituted in the market demand in order to calculate the market price as follows:
Thus, the Cournot equilibrium price is $46.67 and the output is 53.33. Since part d calculated the outputs and prices that are different, they are not Cournot equilibrium prices and outputs.
Want to see more full solutions like this?
Chapter 11 Solutions
Microeconomics
- Brazil, Russia, India, China, and South Africa, also known as BRICS, are emerging countries poised to be dominant economic players in the 21st century. What are some of the political, legal and economic conditions that help or hinder economic expansion for these countries?arrow_forwardExplain what is Microeconomics? Why is it important for all of us to understand what are the drivers in microeconomics?arrow_forwardThe production function for a product is given by Q =100KL.if the price of capital is 120 dollars per day and the price of labor 30 dollars per day what is the minimum cost of producing 1000 units of output ?arrow_forward
- خصائص TVAarrow_forwardplease show complete solution, step by step, thanksarrow_forwardTo determine the benefits of extending hours of operation for a food truck business, the couple should calculate additional revenue, break-even analysis, market demand, and raise prices. They should analyze competitors' prices and customer sensitivity to price changes, determine price elasticity, and test the strategy by implementing a slight price increase and monitoring sales closely. If costs exceed revenues, the couple should analyze their financials, evaluate their business model, explore new revenue streams, and consider long-term viability. They should analyze their financial statements to identify high costs and areas for reduction, evaluate their business model based on market demand, and explore new revenue streams like catering, special events, or partnerships with local businesses. Long-term viability is a key consideration, as if the business still operates at a loss after making adjustments, it may be necessary to consider shutting down. Staying in business should be…arrow_forward
- Respond to following post. You can charge higher prices if the parents think these are valuable by providing different services such as extended hours, healthy lunches, and smaller staff-to-child ratios. But pushing for prices much higher won’t make sense unless parents think the added value is worth the price hike. You should research your local parents to find out what they want. If you want your business to be profitable, then focus on your strengths, do great work and have a reputation. Promote your special products and keep your prices low. If you want to see if you’re making money, keep a log of all your profits and losses. You’re making money if you’re earning more than you’re losing. A break-even analysis can help you figure out how many customers you need to eat and start making money. Keep an eye on your budget so you don’t get off track.arrow_forwardIf you are willing to pay up to $8 for your first cup of coffee the blank of your first cup of coffee is $8arrow_forwardnot use ai pleasearrow_forward
- (Figure: Good Y and Good X) Suppose the budget constraint shifted from constraint 2 to constraint 1. What could have caused this change? Quantity of good Y 18 16 14 Budget constraint 2 12- 10 8 Budget constraint 1 6 4 2 0 2 4 6 8 10 12 14 16 18 20 Quantity of good X an increase in income and an decrease in the price of good X relative to that of good Y a decrease in income an decrease in the price of good X and no change in the price of Y a decrease in income and an increase in the price of good X relative to that of good Y an increase in income a decrease in the price of good X relative to that of good Yarrow_forwardSuppose you have the three scenarios proposed below. Using the language of the Levy and Meltzer paper, Scenario(s). Scenario(s) _ can best be described as a randomized experiment. can best be described as an observational study, and Scenario A: Researchers randomly assign some individuals to a high-intensity workout program and others to a low-intensity program. They then track the participants to see how their cardiovascular health changes over time. Scenario B: Researchers randomly assign individuals to receive varying levels of nutrition education. They track participants and see how eating habits changed. Scenario C: Researchers have data on individuals' workout habits and their cardiovascular health. They use this data to describe the relationship between workout intensity and cardiovascular health. A; B and C A; B and C × A and B; C C; A and B B and C; Aarrow_forwardSuppose you observe that when the price of a particular vitamin supplement_ by 3%, the quantity purchased increased by 0.9%. This implies that this vitamin supplement is price in demand and that the price elasticity of demand is equal to _ ☑ rises; inelastic; 0.3 O O rises; inelastic; 0.9 falls; inelastic; 0.3 rises; elastic; 3 falls; inelastic; 0.9arrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education