ajaz_eco_204_2012_2013_chapter_17__18_PP

# Eco 204 s ajaz hussain do not distribute therefore and

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Unformatted text preview: n. Therefore, Pepsi’s optimal output in spring/summer is: And, Pepsi’s optimal first degree price discrimination price in spring/summer is: [ In fall/winter, Pepsi’s capacity is: ( ) Marginal revenue is: () Note that ( )( ) . 22 ECO 204 Chapter 17 & 18: Practice Problems & Solutions for Firms with Market Power: Business Apps and Price Discrimination in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. Therefore, () And as a result, case C is the solution. Therefore, Pepsi’s optimal output in fall/winter is: And, Pepsi’s optimal first degree price discrimination price in fall/winter is: [ 23 ECO 204 Chapter 17 & 18: Practice Problems & Solutions for Firms with Market Power: Business Apps and Price Discrimination in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. Question 17.3 The Prestigious Ajax Company (PAC) consists of two divisions “1” and “2”. Each division produces the same product using labor ( ) and fixed capital ( ) as inputs but with different technologies. Division 1 produces output according to: While division 2 produces output according to: Assume both divisions have ample capacity and produce and sell output in distinct markets. Currently and (a) Characterize each division’s “returns” (i.e. increasing, constant, or decreasing). Show all calculations below. Answer Division 1 has the production function: ( ) Note that doubling labor will double output: as such, division 1 has constant returns to labor. Division 2 has the production function: ( ) Note that doubling labor will less than double output: as such, division 3 has decreasing returns to labor. 24 ECO 204 Chapter 17 & 18: Practice Problems & Solutions for Firms with Market Power: Business Apps and Price Discrimination in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. (b) Calculate the optimal labor required to produce target output Show all calculations belo...
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## This document was uploaded on 01/19/2014.

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