Ec101F10_Homework1_101103

# Ec101F10_Homework1_101103 - Economics 101, UCLA Fall 2010...

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Economics 101, UCLA Fall 2010 Jernej Copic Homework 1, 11/03/2010; Tue 11/09/2010, 1230pm. Monopoly, travel costs, and entry. On a surface of a distant planet called Zorx, there live many consumers who are all interested in consuming only one good called spice . There are ﬁrms that sell spice. The problem is that these ﬁrms must set up trading posts in order to sell spice, and consumers then need to travel to the trading posts to buy the spice. Since the planet is rugged and dangerous, traveling implies costs, in particular, a consumer’s travel cost is \$1 /mile traveled. Each consumer wants to buy 1 unit of spice, and he values that 1 unit at \$5. Each trading post that a ﬁrm sets up costs \$10 to set up. The production cost of spice is \$1 /unit of spice. In the following questions, represent Zorx as a circle, and the consumers all live on its circumference. The radius of Zorx is 10 2 π miles. In terms of consumers, you have two modeling choices: 1. One possibility is that there is a ﬁnite number, 100,

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## This note was uploaded on 11/14/2010 for the course ECON 101 taught by Professor Buddin during the Fall '08 term at UCLA.

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Ec101F10_Homework1_101103 - Economics 101, UCLA Fall 2010...

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