Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B, and each has a cost function TC = 2 + q. Determine the Cournot equilibrium
What will be an ideal response?
Firm A's profit is π = [10 - (qA + qB)]qA - 2 - qA. Maximizing with respect to its own output yields qA = 4.5 - qB/2. Similarly, firm B's best response is = 4.5 - qA/2. The equilibrium occurs when both firms produce 3 units. Price is 10 - 3 - 3 = 4.
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If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to
a. charge a stand-by passenger no less than the full fare of $500. b. charge a stand-by passenger less than $100. c. charge a stand-by passenger more than $500. d. charge a stand-by passenger more than $100. e. fill the seats at the last minute for any price.
Consider the currency market for British pounds and U.S. dollars. A decrease in the supply of British pounds results in:
A. An appreciation of the pound and a depreciation of the dollar B. A depreciation of the pound and a depreciation of the dollar C. An appreciation of the pound and an appreciation of the dollar D. A depreciation of the pound and an appreciation of the dollar