Project #88121 - Microeconomics help

**PLEASE MAKE SURE THAT THE TABLES/GRAPHS ARE ABLE TO BE COPY AND PASTED**

  1. The accompanying table shows the demand schedule for Vitamin D. Suppose the marginal cost of producing Vitamin D is zero

    Price of Vitamin D Quantity of Vitamin D
    $8 0
    $7 10
    $6 20
    $5 30
    $4 40
    $3 50
    $2 60
    $1 70

    a) Suppose that company A is the only producer of Vitamin D and act as a monopolist. Suppose the company produces 40 units of Vitamin D at $4/unit. If the company decides to produce 10 units more, what is the price effect? What is the quantity effect? Would the company then have an incentive to produce 10 more units?
    b) Now suppose that company B enters the market, and the market is now a duopoly. The companies decide to produce 40 units in total. Company A cannot be punished for deviating from the agreement with company B. If company A decided to produce 10 units more, what is the price effect? What is the quantity effect? Should company A have an incentive to produce 10 additional units?

  2. Suppose that there are two fishing companies who are behaving non-cooperatively. Assume that the two sides can send out 1 or 2 fleets each; and the more fleets in the area. The more fish they catch, but the lower the catch of each fleet. The matrix below shows the profits per week earned by the two sides

 

 

Company 2

 

 

 

2 fleet

Company 1

1 fleet

10,000 / 10,000

4,000 / 12,000

2 fleet

12,000 / 4,000

7,500 / 7,500


a) What is the non-cooperative Nash equilibrium? Will each side choose to send out 1 or 2 fleets?
b) Suppose that fish stocks are getting depleted. Each side considers the future and comes to a tit-for-tat agreement, where each side will send 1 fleet as long as the other does the same. If either breaks the agreement, and sends out a second fleet, the other company will also send out a second fleet and will continue to do so until the other company sends out only 1 fleet. If both companies follow this strategy, how much profit will each company make a week?

  1. Use the conditions for monopolistic competition discussed in this chapter to decide which of the following firms are likely to operate as monopolistic competitors. If they are not, are they monopolists, oligopolists, or perfectly competitive firms?
    a) A local band that plays for parties, etc
    b) Minute Maid, a producer of juice boxes
    c) Your local dry cleaner
    d) A`farmer who produces soybeans

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Due By (Pacific Time) 10/21/2015 03:00 pm
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