Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 13, Problem 2.3P
(a)
To determine
The graph on marginal cost and average cost.
(b)
To determine
Total revenue, total cost, and total profit.
(c)
To determine
(d)
To determine
Memo on monopoly.
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. (Requires calculus). In the model of a dominant firm, assume that the fringe supply curve is given by Q = -1 + 0.2P, where P is market price and Q is output. Demand is given by Q = 11 – P.What will price and output be if there is no dominant firm? Now assume that there is a dominant firm, whose marginal cost is constant at $6. Derive the residual demand curve that it faces and calculate its profit-maximizing output and price. highest bidder, but both the winning and losing bidders must pay her their bids. So if Jones bids $1 they pay a total of $3, but Jones gets the money, leaving him with a net gain of $98 and Smith with -$1. If both bid the same amount, the $100 is split evenly between them. Assume that each of them has only two $1 bills on hand, leaving three possible bids: $0, $1 or $2. Write out the payoff matrix for this game, and then find its Nash equilibrium.
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets.
Equations (1) and (2) give the total cost functions of the two firms:
- Firm A: TC - 2Q
-(1)
- Firm B TC = 10 + 2Q -
-(2)
Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000.
(a) Explain the relationship between the zero-profit curve and the marginal cost curve for the two
firms using the quantity schedule of the two firms and the relevant plots of equations (1) and (2).
(b) Use the plots in Q 1(a) and plots of isoprofit curves valuing Rs. 34,000 and Rs. 60,000 for the two
firms to identify any differences in the shape of the two firms' isoprofit curves. Can you provide
an explanation for any differences that may exist?
(c) Use the information on both firms to assess whether the higher isoprofit curves would always get
closer to the average cost curve as quantity increases. Explain why or why not.
Chapter 13 Solutions
Principles of Economics (12th Edition)
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