Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B. Each has a cost function TC = 2 + Q. Determine the equilibrium quantities of each if firm A is the Stackelberg leader
What will be an ideal response?
Firm B's profit is ? = [10 - (qA + qB)]qB - 2 - qB. Maximizing with respect to its own output yields firm B's best response qB = 4.5 - qA/2. Knowing this, firm A substitutes this into demand and maximizes its profit. ? = [10 - qA - (4.5 - qA/2)]qA - 2 - qA. Maximizing with respect to qA yields qA = 4.5. Firm B responds by producing 2.25.
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What is the difference between national income and personal income?
A. Personal taxes. B. National income includes income earned both in the United States and abroad, while personal income only includes that income earned within the borders of the United States. C. National income represents before-tax income, while personal income measures how much is available for spending after all taxes have been subtracted. D. National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned.
If the price elasticity of demand is less than 1, then consumer demand is
A) unrelated to the elasticity of demand. B) inelastic. C) elastic. D) unitary elastic.