ajaz_eco_204_2012_2013_chapter_16_Market_Power_PP

# State all assumptions and show all calculations

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: l revenue and marginal cost only. State all assumptions and show all calculations. Question 16.6 The economist, Hugo Salgado, estimated the following demand models for Intel and AMD PC (personal computer) “CPU chips” (Central Processing Units): 1 ECO 204 Chapter 16: Practice Problems & Solutions for Analysis of Firms with Market Power in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. The subscripts and refer to “AMD” and “Intel” respectively where ( ) and Notice these demand models are of the form ( CPU and quantity of CPUs (millions). ) respectively. Hugo also estimated AMD and Intel’s average variable cost: Throughout this final exam assume that AMD and Intel: ● are in the short run ● have ample capacity ● and will always produce strictly positive output (i.e. ). (a) What kind of “returns” to variable inputs do AMD and Intel have? Give a brief explanation. (b) Suppose AMD and Intel each have the following type of production function: Here ● output ● materials ● “technology & management” parameter ● are parameters. fixed labor ● fixed capital ● variable What is the numerical value of AMD’s parameter ? What is the numerical value of Intel’s parameter ? Hint: Both companies have the same value of . Show all calculations. (c) Suppose AMD’s production function is: management” parameter ● labor at AMD ● parameters. where ● capital at AMD ● Suppose Intel’s production function is: management” parameter ● labor at Intel ● parameters. AMD’s output ● AMD’s “technology & materials at AMD ● are where ● Intel’s output ● Intel’s “technology & capital at Intel ● materials at Intel ● are Assume that AMD and Intel are currently: ● employing the same amount of labor (i.e. capital (i.e. ) ● have identical parameters ● f...
View Full Document

## This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online