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2. (30 pts) Consider a Stackelberg game of quantity competition in cigarettes between Philip Morris (biggest...
2. (15 pts) Consider a Stackelberg duopoly game of quantity competition in U.S. cigarettes between Philip...
2. (15 pts) Consider a Stackelberg duopoly game of quantity competition in U.S. cigarettes between Philip Morris (PM, biggest brand is Marlboro) and RJ Reynolds (RJR, biggest brand is Camel). Philip Morris is the leader, and Reynolds is the follower. (We will obviously ignore state-minimum pricing and taxes for this question.) Market demand is described by the inverse demand function P 12 0.005Q. Each firm has a constant unit cost of production equal to 2. Prices are in S/pack, and...
Consider a market with Stackelberg competition. The inverse demand curve is P = a−b Q, with...
Consider a market with Stackelberg competition. The inverse demand curve is P = a−b Q, with a=13 and b=3. Firm 1 is the leader and produces at constant marginal costs equal to zero. Firm 2 is the follower and has the cost function: C(q) = cq^2, with c=5. (Note the square on q). What is the equilibrium quantity of firm 1?
6. (6 pts) In a Stackelberg model of quantity competition, firm 1 moves first by commiting...
6. (6 pts) In a Stackelberg model of quantity competition, firm 1 moves first by commiting to a level of output, and firm 2 moves second after observing firm 1's choice. The market inverse demand curve is given by: P = 110-Q and the firms' cost structures are given by: CQ) K10Q where Kis a fixed cost of production (a Suppos A = 0. Find the quantities and profits for each firm in the subgame perfect Nash equiibru. (4 pts)...
Suppose a single firm produces all of the output in a contestable market. The market inverse...
Suppose a single firm produces all of the output in a contestable market. The market inverse demand function is P= 400-4Q, and the firm's cost function is G Price: $ | 1 Profits: $ 10Q. Determine the firm's equilibrium price and corresponding profits. You are the manager of a firm that competes against four other firms by bidding for government contracts. While you believe your product is better than the competition, the government purchasing agent views the products as identical...
Oligopoly The inverse demand curve for brimstone is given by p(Y) 116-3Y (with Y total quantity...
Oligopoly The inverse demand curve for brimstone is given by p(Y) 116-3Y (with Y total quantity of brimstone, measured in the conventional units) and the cost function for any firm in the industry is given by TC(y)-8y (with y the output of the firm) a. Determine the industry output and price if the brimstone industry were perfectly competitive Suppose that two Cournot firms operated in the market (Firm 1 and Firm 2) Determine the reaction function of Firm 1. Do...
Acoustek produces high-end guitar, serving the Canadian market as a monopolist. The market demand is p...
Acoustek produces high-end guitar, serving the Canadian market as a monopolist. The market demand is p = 280 – 2Q and Acoustek’s marginal cost of production is $40 for each unit of guitar with the current production capacity. 1.a (4 marks) Calculate the equilibrium price, output and profit of Acoustek as a monopoly. 1.b (7 marks) Suppose a new entrant is planning to enter the market by investing $2,000 for the production facility. The entrant’s marginal cost of production will...
2. Cournot competition Aa Aa Consider a town in which only two residents, Sam and Amy,...
2. Cournot competition Aa Aa Consider a town in which only two residents, Sam and Amy, own wells that produce water safe for drinking. Sam and Amy can pump and sell as much water as they want at no cost. Assume that outside water cannot be transported into the town for sale. The following questions will walk you through how to compute the Cournot quantity competition outcome for these duopolists. Consider the market demand curve for water and the marginal...
Lecture notes for reference: 2 Subsidies in Strategic Trade Policy This question asks you to show...
Lecture notes for reference:
2 Subsidies in Strategic Trade Policy This question asks you to show that the optimal unilateral subsidy in the strategic trade policy setting is always positive. We will take the example of Boeing and Airbus used in lecture, with all the same parameters. 1. The E.U. government's objective is to maximize domestic profits less the cost of the subsidy. Write down the E.U.'s maximization problem as a function of the chosen quantities of Airbus and Boeing,...
2. (15 pts) Consider a Stackelberg duopoly game of quantity competition in U.S. cigarettes between Philip Morris (PM, biggest brand is Marlboro) and RJ Reynolds (RJR, biggest brand is Camel). Philip Morris is the leader, and Reynolds is the follower. (We will obviously ignore state-minimum pricing and taxes for this question.) Market demand is described by the inverse demand function P 12 0.005Q. Each firm has a constant unit cost of production equal to 2. Prices are in S/pack, and...
6. (6 pts) In a Stackelberg model of quantity competition, firm 1 moves first by commiting to a level of output, and firm 2 moves second after observing firm 1's choice. The market inverse demand curve is given by: P = 110-Q and the firms' cost structures are given by: CQ) K10Q where Kis a fixed cost of production (a Suppos A = 0. Find the quantities and profits for each firm in the subgame perfect Nash equiibru. (4 pts)...
Suppose a single firm produces all of the output in a contestable market. The market inverse demand function is P= 400-4Q, and the firm's cost function is G Price: $ | 1 Profits: $ 10Q. Determine the firm's equilibrium price and corresponding profits. You are the manager of a firm that competes against four other firms by bidding for government contracts. While you believe your product is better than the competition, the government purchasing agent views the products as identical...
Oligopoly The inverse demand curve for brimstone is given by p(Y) 116-3Y (with Y total quantity of brimstone, measured in the conventional units) and the cost function for any firm in the industry is given by TC(y)-8y (with y the output of the firm) a. Determine the industry output and price if the brimstone industry were perfectly competitive Suppose that two Cournot firms operated in the market (Firm 1 and Firm 2) Determine the reaction function of Firm 1. Do...
2. Cournot competition Aa Aa Consider a town in which only two residents, Sam and Amy, own wells that produce water safe for drinking. Sam and Amy can pump and sell as much water as they want at no cost. Assume that outside water cannot be transported into the town for sale. The following questions will walk you through how to compute the Cournot quantity competition outcome for these duopolists. Consider the market demand curve for water and the marginal...
Lecture notes for reference:
2 Subsidies in Strategic Trade Policy This question asks you to show that the optimal unilateral subsidy in the strategic trade policy setting is always positive. We will take the example of Boeing and Airbus used in lecture, with all the same parameters. 1. The E.U. government's objective is to maximize domestic profits less the cost of the subsidy. Write down the E.U.'s maximization problem as a function of the chosen quantities of Airbus and Boeing,...
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