Problem #6, p. 221 in text. (You do not need to “derive” the Cournot equilibrium. Just solve for the values using the appropriate formulas.) Market demand: P = 400 – 2Q Unit cost production = 40 a. Firm’s quantity in equilibrium is : q1 = (a-c)/3b = (400-40)/(3*2)= 60 unit = q2 Firm’s revenue: P= 400 – 2 * (2*60) = $160 Firm’s profit = (60*160) – (60*40) = $7200 b. Monopoly output: MR=400-4q MC=40 MR=MC 400 – 4q = 40 then q=90 unit The reason that producing on half the monopoly output (90*1.5 = 135) a Nash equilibrium outcome is that it will exceed the market demand of Nash equilibrium ($160).
c. Suppose government imposes a tax equal to the marginal external cost. What is the equilibrium price paid by consumers and the equilibrium quantity after implementation of the tax? d. At the output level in part (c), how much is the tax? e. How much tax revenue does government collect? f. What is the deadweight loss borne by society if the externality is left uncorrected?
Maximizing profit which means total revenue minus total goal is a competitive firm’s goal. The competitive firm takes the market price given and then chooses how much supply is needed so that a sales price can be determined for profit. The monopoly firm determines their price on the quantity of products to sell. The monopoly decides how much of its product to make and what price to charge for it. Individual financial gain determines the price for oligopolies.
(p. 193) Implications of _______________ theory are that pay level affects an employer's ability to recruit. a. human capital B. reservation wage c. signaling d. efficiency 5. (p. 194) ____________ sets a maximum pay level an employer can pay. a. Government legislation B.
| | Answer Key: C | | | Question 3 of 10 | 10.0 Points | An economic system is the set of rules that define _______ and _______ . | | A.resources; prices | | | B.who gets to vote; when elections will be held | | | C.market prices; factors of production | | | D.how an economy's resources are to be owned; how decisions about the resources are to be made | | Answer Key: D | | | Question 4 of 10 | 10.0 Points | In a market capitalist economy: | | A.factors of production are owned privately and decisions about their use are basically made by individuals. | | | B.factors of production are owned by the government but decisions about their use are made privately. | | | C.private ownership exists but decisions about resource allocation are usually made centrally by the government. | | | D.there is no role for the government.
What theory of profit best reflects the performance of the plasma screen makers? 2 To reduce Agency Problems, executive compensation should be designed to: Correct Answer: create incentives so that managers act like owners of the firm. 3 Economic profit is defined as the difference between revenue
Discuss surplus-enhancing transactions in markets 6. Explain how elasticity affects the way in which the burden of a per-unit tax is shared between buyers and sellers 7. Explain how elasticity affects the size of the deadweight loss created by a per-unit tax **NOTE: All of chapter 5 of Hubbard, Garnett, Lewis and O’Brien (2011) Microeconomics, 2nd edition, Pearson is required reading. 1. Consumer surplus The difference between the highest price a consumer is willing to pay for a good or service, and the price they actually pay.
Executive Summary The recommendation for Teletech Corporation is to change from a constant hurdle rate to the use of two risk-adjusted hurdle rates, one for each segment. Teletech’s performance is evaluated upon economic profit calculations. Through this performance measure, the risk-adjusted hurdle rates return a higher amount of profit in comparison to a single corporate hurdle rate: Currently, the firm has been using the constant hurdle rate of 9.30%, and as a result the firm’s share prices are stagnant. In comparison, the market and industry indexes such as telecommunications and telecommunication equipment have outperformed Teletech. Their price-to-earnings ratio is also below investor’s expectation in comparison to the company’s risk.
Sheltering new industries may pay off later 4. Free trade allows companies the possibility of outsourcing the production of goods for domestic sale. Question No.3: Identify the major fallacies of international trade? Answer: 1. One fallacy is that trade is a zero sum activity, if one trading party gains, the other must lost.
Therefore, the equilibrium rate of growth is given by matching proportionate change in output with the ratio of savings-output to that of capital-output. This sustains the economy along some warranted steady growth path. According to the model, temporary deviations from the warranted growth path would not be self-correcting. Because of the lack of self-correcting forces within the dynamics of the model, it is said to be characterized by ‘knife-edge instability’. That is, market-regulated growth espoused by the model is unstable and, thus, necessitates government intervention.