ECON309 Solutions to Lecture 4 Problems
1. (PRN Chapter 7, Q1)
(a) For z = 1, profits for this firm is given by
= PQ VC (Q) FC= (36 2Q)(1)(Q) 0 (65)(12 )= 36Q 2Q 2 65
Taking the derivative of the pro
6. The inverse market demand for fax paper
is given by P = 400 2Q. There are two
rms who produce fax paper. Each rm has
a unit cost of production equal to 40, and
they compete in the market in quantit
In Tuftsville, everyone lives along Main
Street, which is 10 miles long. There are
1,000 people uniformly spread up and down
Main Street, and every day they each buy
a fruit smoothie from one of the t
Suppose that two rms compete in quanti
ties (Coumot) in a market in which demand
is described by: P = 260212. Each rm
incurs no xed cost but has a marginal cost
of 20.
a. What is the oneperiod Nash eq
For problems 1. 2, 3, and 4 consider a market
containing four identical rms, each of which
makes an identical product. The inverse demand
for this product is P = ICO- Q. where P is
price and Q is aggr
Problems
1. The following table gives US market share data in percentages for three paper product markets
in 1994.
Facial Tissue Toilet Paper Paper Towels
Company % Share Company % Share Company % Sha
1.
A university has determined that its stu
dents fall into two categories when it comes
to room and board demand. University plan-
ners call these two types Sleepers and Eaters.
The reservation price
1.
A monopolist faces the following inverse
demand curve: P = (36 2Q)z; where P
is price; Q is her total output; and z is
the quality of product sold. 2 can take on
only one of two values. The monopol
2. A nearby pizza parlor offers pizzas in three
sizes: small, medium, and large. Its corre
sponding price schedule is: $6, $8, and $10.
Do these data indicate that the rm is price
discriminating? Why
List three markets that you think are imper-
fectly competitive. Explain your reasoning.
Explain why a perfectly competitive mar-
ket does not reect a setting of strategic
interaction. 3.
Suppose that
FAMILY NAME.
OTHER NAMES.
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Candidates are not permitted to remove any
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STUDENT NUMBER.
EXAMINATION DETAILS:
Unit Code:
ECON309
ECON309 Solutions to Lecture 3 Problems
1. (PRN Chapter 5, Q2)
We dont know because we dont know the cost of different pizzas. If there are differences
between prices that exceed the differences betwe
Suppose that the inverse demand function
is described by: P = 100 203] + qg),
where q] is the output of the incumbent
rm and q2 is the output of the entrant. Let
the labor cost per unit to = 20 and ca