lofoco,joseph week 3 HW - Strayer University ECO550 Joseph...

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Strayer University- ECO550 Joseph B Lofoco Homework - Week 3 Chapter 5 Questions and Problems: 1 (a-c) and 10 1. A firm in a perfectly competitive market invents a new method of production that lowers its marginal costs. What happens to its output? What happens to the price it charges? a. The firm has an employee who threatens to tell all other firms in the industry about how to implement this new technique. Will it be possible to bride the employee not to do this? Explain why or why not. b. Why should this employee probable choose to tell only some of the other firms rather than all of them? c. What factors will determine the best number of firms to sell the secret to? (Assume that those who get the information keep the secret instead of selling it to still others.) 2. (Requires Calculus) A perfectly competitive firm faces a market price of $10 for its output X. Its own plants, A and B, whose total costs are TCa=10+2X+.25X2 TCb=15+.4X+.1X2. How many units should each plant produce to maximize profit at that price?
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