EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 12, Problem 9RQ
To determine
Whether the additional profits from the lower cost be greater if the firm can retain this innovation solely for its own use.
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Ugly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete.
Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that,
(a) The numbers of firms operating in this market will not change.
(b) At equilibrium the profit of firms will increase.
(c) The quantity of types of dolls available to consumers will increase.
(d) All the above answers are correct.
Could you answer #2 please? Thanks!
1. Reproduce the numerical example from the chapter on Monopolistic Competition in the book by Krugman & Obstfeld. If you do not have the book, here is the relevant information (the model and the equations are the same as those in the slides). Consider two countries, Home and Foreign, with the following market sizes: SH = 900,000 and SF = 1,600,000. The demand function for industry i is represented by
Q = S[( 1 / n − 1 / 30,000) ∙ (Pi − P)]
While the total cost function is represented by TC = 750,000,000 + 5,000 ∙ Q
(a) Compute the long-run equilibrium price and the long-run number of varieties in Home and in Foreign under AUTARKY.
(b) Compute the long-run equilibrium price and the long-run number of varieties in the integrated market when there is FREE TRADE.
(c) Compare (a) and (b) and show that both countries are better off.
2. Now suppose that the two countries that we considered in the numerical example of the previous exercise were to…
Reproduce the numerical example from the chapter on Monopolistic Competition in the book by Krugman & Obstfeld. If you do not have the book, here is the relevant information (the model and the equations are the same as those in the slides). Consider two countries, Home and Foreign, with the following market sizes: SH = 900,000 and SF = 1,600,000. The demand function for industry i is represented by
Q = S[( 1 / n − 1 / 30,000) ∙ (Pi − P)]
While the total cost function is represented by TC = 750,000,000 + 5,000 ∙ Q
(a) Compute the long-run equilibrium price and the long-run number of varieties in Home and in Foreign under AUTARKY.
(b) Compute the long-run equilibrium price and the long-run number of varieties in the integrated market when there is FREE TRADE.
(c) Compare (a) and (b) and show that both countries are better off.
Now suppose that the two countries that we considered in the numerical example of the previous exercise were to integrate their automobile market with a…
Chapter 12 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 12.2 - Prob. 1TTACh. 12.2 - Prob. 2TTACh. 12.2 - Prob. 1MQCh. 12.2 - Prob. 2MQCh. 12.2 - Prob. 1.1TTACh. 12.2 - Prob. 2.1TTACh. 12.2 - Prob. 1.1MQCh. 12.3 - Prob. 1MQCh. 12.3 - Prob. 2MQCh. 12.3 - Prob. 1TTA
Ch. 12.3 - Prob. 2TTACh. 12.3 - Prob. 1.1MQCh. 12.3 - Prob. 2.1MQCh. 12.3 - Prob. 1.1TTACh. 12.3 - Prob. 2.1TTACh. 12.4 - Prob. 1TTACh. 12.4 - Prob. 2TTACh. 12.5 - Prob. 1MQCh. 12.5 - Prob. 2MQCh. 12.5 - Prob. 1TTACh. 12.5 - Prob. 2TTACh. 12.6 - Prob. 1MQCh. 12.6 - Prob. 2MQCh. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQCh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10P
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