Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 3.A, Problem 6ARQ
To determine
Demand and supply.
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The daily demand of two firms Firm 1 and Firm 2 producing two products is given by :
D1 = 5 - 22P1 + 11P2
D2 = 50 - 22P1 + 11P2
These are the only firms producing the products. MC of Firm 1 is $0.5 per product and MC of Firm 2 is $2 per product.
Q1. Calculate the equilibrium quantity and price of both the firms. You may assume that firms want to maximise the profits.
Q2.Calculate producer surplus and deadweight loss.
In India, Cisco’s market share of the Ethernet switch and router market is approximately 67 percent. Juniper and HP each have market shares of about 6.5 percent, and several other firms have somewhat smaller market shares. Draw a diagram showing the equilibrium in this dominant firm market. Identify the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms. Illustrate what happens to the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms if additional fringe firms enter the market
Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing
substitutes for this good, the price of EpiPens is $150.
Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the
economist on staff at Mylan, you are charged with the task of figuring out what your company's new pricing strategy should be.
The following graph shows the marginal cost (MC), which is assumed to be constant, and the average total cost (ATC) of Mylan. The graph also shows
the demand curve (D) for EpiPens and the marginal revenue curve (MR) once the firm has market power.
On the graph, use the grey point (star symbol) to indicate the quantity of EpiPens demanded if Mylan continues to charge $150. Dashed drop lines will
automatically extend to both axes.
1000
900
9, at $150
800
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600
Profit Max
500
400
ATC at Profit Max
300
200
ATC
Profit
100
MC-
MR…
Chapter 3 Solutions
Macroeconomics
Ch. 3.6 - Prob. 1QQCh. 3.6 - Prob. 2QQCh. 3.6 - Prob. 3QQCh. 3.6 - Prob. 4QQCh. 3.A - Prob. 1ADQCh. 3.A - Prob. 2ADQCh. 3.A - Prob. 3ADQCh. 3.A - Prob. 4ADQCh. 3.A - Prob. 5ADQCh. 3.A - Prob. 6ADQ
Ch. 3.A - Prob. 7ADQCh. 3.A - Prob. 1ARQCh. 3.A - Prob. 2ARQCh. 3.A - Prob. 3ARQCh. 3.A - Prob. 4ARQCh. 3.A - Prob. 5ARQCh. 3.A - Prob. 6ARQCh. 3.A - Prob. 1APCh. 3.A - Prob. 2APCh. 3.A - Prob. 3APCh. 3 - Prob. 1DQCh. 3 - Prob. 2DQCh. 3 - Prob. 3DQCh. 3 - Prob. 4DQCh. 3 - Prob. 5DQCh. 3 - Prob. 6DQCh. 3 - Prob. 7DQCh. 3 - Prob. 8DQCh. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7P
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- Back to Assignment Attempte 2. The market for EpiPens Consider the pharmaceutical company Mylan that produces epinephrine injection devices called EpiPens. In the presence of other firms producing substitutes for this good, the price of EpiPens is $150. Now suppose that competitors to Mylan no longer produce epinephrine injection devices, so Mylan now has pricing power in this market. As the economist on staff at Mylart, you are charged with the task of figuring out what your company's new pricing strategy should be. The following graph shows the marginal cost (MC), which is essumed to be constant, and the average total cost (ATC) of Mylen. The graph also shows JAMOD JANUALUL SEU UuU aun 324D (gw) ann an AM, PUIŠJEW) Din pue suadida (0) (0) ANDA SUPwar 241 On the graph, use the grer point (star symbol) to indicate the quantity of EpiPere demanded in Mylan continues to charge $150. Deshed drop lines will sudomsically extend to both, exes. e fat par JECH 342 AN Keep the Highest/3 COP…arrow_forwardTo examine the effects of a subsidy, consider the large passenger jetliners market with two firms that sell identical products, Firm 1 and Firm 2. Without any subsidy, both firms will have the same cost functions of C(q) = 40q and MC = 40. The market demand is P = 100 – Q. NEED CALCULATION HELP PLEASE!!! Solve for the Cournot equilibrium price, quantities, and profits for each firm given the same MC= 40. Compare the deadweight loss in a monopoly, a Cournot duopoly, and a Bertrand duopoly if both firms have the same marginal cost of 40. How would this market change if Firm 2 receives a subsidy lowering the marginal cost to 25 and Firm 1's marginal cost remains at 40. Calculate new market equilibrium quantity, price, and profits for each firm. Calculate the change in welfare after the subsidy. In this case welfare is defined as the Firm 2’s profit minus the subsidy. Who gains from the subsidy? Explainarrow_forwardThree firms are producing a good and are competing in prices: consumers buy from the firm that has the lowest price, and each firm on its own can satisfy the entire market. If more than one firm choose the same price the demand is divided equally among them. There are no other firms in the market. Two firms have the same constant marginal cost cL and the third one has a higher marginal cost cH : cL < cH . Explain what will be the equilibrium price in this market.arrow_forward
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- Two firms (called firm 1 and firm 2) are the only sellers of a good for which the demand equation is Here, q is the total quantity of the good demanded and p is the price of the good measured in dollars. Neither firm has any fixed costs, and each firm’s marginal cost of producing a unit of goods is $2. Imagine that each firm produces some quantity of goods, and that these goods are sold to consumers at the highest price at which all of the goods can be sold. A Cournot equilibrium in this environment is a pair of outputs (q1, q2) such that, when firm 1 produces q1 units of goods and firm 2 produces q2 units of goods, neither firm can raise its profits by unilaterally changing its output. Find the Cournot equilibrium. Determine whether the price at which the goods are sold exceeds marginal cost.arrow_forwardThere are two movie theaters in the town of Harkinsville: Modern Multiplex (Firm 1) and Galaxy (Firm 2). The demands for each firm are: Q1 = 125 – 3.5P1 + 2P2 and Q2 = 125 – 3.5P2 + 2P1, where quantities are measured in hundreds of moviegoers. Costs per customer are: $4 for Firm 1 and $3 for Firm 2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Use commas (30,000 instead of 30000) Complete the following table. P1 P2 Q1 Q2 Profits F1 Profits F2 Firm 1 colludes, Firm 2 cheats w/ QDC 2,824 Firm 1 colludes, Firm 2 cheats w/ QBRFarrow_forwardThere are two movie theaters in the town of Harkinsville: Modern Multiplex (Firm 1) and Galaxy (Firm 2). The demands for each firm are: Q1 = 125 – 3.5P1 + 2P2 and Q2 = 125 – 3.5P2 + 2P1, where quantities are measured in hundreds of moviegoers. Costs per customer are: $4 for Firm 1 and $3 for Firm 2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Use commas (30,000 instead of 30000) Complete the following table. P1 P2 Q1 Q2 Profits F1 Profits F2 Duopoly competition 2,059 Collusion 2,360arrow_forward
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