e9c18dad7ea92e9948ddb47cc335b3be_0f336d4c31ec4687452c33cb9e31b8c9 - Econ 342 Homework#3 McLeod Due in class Wednesday March 18th Name(please print or


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Econ 342 Homework #3 McLeod Due in class Wednesday, March 18th. Name (please print or type) ____________________________________________________ Instructions: Please Read Carefully Please print out this form. There are three problems on this assignment. Please answer each problem completely. There are 50 possible points on this homework assignment. You may work together, but you MUST WRITE UP YOUR OWN WORK and TURN IT IN, IN PERSON, AT THE BEGINNING OF CLASS on Wednesday, March 18th. PLEASE STAPLE YOUR HOMEWORK!!
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1. (18 total points) Suppose there are 8 firms located equidistantly around a circle whose circumference is equal to 1. There are 400 consumers distributed uniformly around the circle. Each consumer gets utility U = 3.5 from buying a unit of the good from a firm which sells their ideal brand (a firm located at the consumer’s location). Also, the consumer’s utility decreases by 4 times the distance that the consumer is located from the firm. So a consumer who buys from firm i gets utility given by U i = 3.5 – 4x i where x i is the distance from the consumer’s location to firm i’s location. The consumer’s surplus from purchasing a unit of the good from firm i is the difference between their utility from purchasing a unit of the good from firm i and the price that firm i charges. So CS = U i
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