Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 8, Problem 4P
To determine
Complete the table and answer the subparts.
Introduction:
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=
-
12. Recall the market setting in Question 3, where
the demand curve is P = 10 – 2Q, and mar-
ginal cost is c 2. Now suppose that two
firms, numbered 1 and 2 compete over this de-
mand curve. They produce quantities Q₁ and
Q2, hence total output is given by Q = Q1+Q2.
The best response function of firm 1 to firm 2,
labeled Q₁ = B₁ (Q2) is given by
(a) 2-2Q2
-
4
(b) 2-Q2
(c) 2 – 02
Q2
Q2
(d) 2-
(e) 2-Q
4
13. In the previous question, the Cournot-Nash
equilibrium quantity produced by each firm is
(a) 1
(d) 2
(b)
3
2
(e)
52
(c)
43
3
2. Sweet taxes make the world sweeter!
According to a study conducted by the World Health Organization, noncommunicable diseases, such as heart disease, cancer, diabetes, chronic lung disease, and stroke, are the main leading causes of deaths—almost 90% worldwide. These diseases also have social and economic costs. Cardiovascular diseases, for example, cost the economy of the European Union about 210 billion Euro in 2015.
One method some European countries adopted to try to reduce the death rate from those leading causes was to impose high taxes on sugar-sweetened beverages.
Assume that your next president loves the idea of sugar taxes and proposes a 30% tax on all sugary beverages in the country. And assume you are a marketing manager at a company that makes sugary soft drinks. The owner of the company heard the news and came to you for advice and asked you the following questions:
So, buddy, should I be worried about our business if this sugar tax policy is implemented? Why?
How do…
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