Question

QUESTION 1 Use the following information to answer questions (1)-(5). Consider a two identical oligopolists facing a market demand corresponding to the equation: P=$160-0.5*Q, where P is the price level and Q is the total supply to the market. The production function of the technology used by each identical olipolist operates according to: q=42+12+ln(w), where w is the unit of labor employed and q the level of production. The total cost of production follows equation: TC=q+q%. The following table summarizes the market conditions and the monopoly's production technology and cost structure. Workers P= 42+ 12*In(w) $160- 0.5*Q TC= q+q? (w) 0.1 14 $210 23 $552 28 $812 $992 $1,190 $1,332 0.7 $1,482 $1,560 $1,640 $1,722 $1,806 $2,550 $3,080 $3,540 $3,782

Answer 1

We have, produce Market demand = P = 160 - 0.50 where a = 91 +92 qi = 42 +12 en (w) TC = 9+ 92 MC = 1+2qi When biom I produces 15 units of q ; and from a 92 = 15. | X = P, Q - M y TC = (160-0.5(30)] 15 - (15+15) = (160-15) X15 – 250 = 145×15 – 250 - 2175-250 = $ 1925. (2) When qi= 15 units and q2 = 25 Q=15+25=40 P= 160- (40) = $140 in Ti = 140815 - 15-(15) 2 - 2100 - 250 T = $1850

Similarly, since from a is identical. is 92 = 53 -91 | 4 53 - 5(53 - 5 ) 9, = 53 - 8.83+ 21-5691 - 318-53 $186 35 91 = 265 9 = 265 X 360 6x357 C a, = 45.42 53 92= 45.42 At this level, brofit is maximum. p - 160 - 0.5(90.84) P = 160-45.42 = $ 114.58 T = 114.58×45.42 - 2108.39 = 5204-22 - 2108.39 Ti = $ 3095.83 OR If he has to choose b/w the given strategies. Profit is maximum when 91=25 and q2 = 15.