Suppose aggregate demand is P(Q) = 21 – 2Q in a competitive…
Suppose aggregate demand is P(Q) = 21 – 2Q in a competitive environment (the product is an identical/homogenous commodity).There are three firms with different cost structures that could sell:C1(Q) =1 + Q + .5 * Q2C2(Q) = Q + Q2C3(Q) = 100 +Q + 2.5 * Q2What is the equilibrium quantity? Note that demand is different and firms 1 and 3 have a different cost function when compared to prior question. (Hint: answer is not an integer)
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Consider a coffee shop on campus that sells to both students and faculty. The coffee shop’s cost function is C(Q) =.2 + .2 * Q.Right before exams, students really need coffee, and have demand PS(Q) = 8.2 – .5 * Q; however, faculty do not need as much coffee until after the exam, so their demand is PF(Q) = 4.6 – .4 * Q. Suppose there are 10 students and 2 faculty members.How much producer surplus could the coffee shop get if it is able to charge personalized prices? (Hint: answer is not an integer).
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