1. Elverys can split the market for Adidas hoodies into two easily identifiable groups, teenagers and...

  

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1. Elverys can split the market for Adidas hoodies into two easily identifiable groups, teenagers and 3rd level students. The cost of producing and selling a hoodie is identical in each market (a) Elverys decides to sell 80 hoodies in both markets. At this allocation, in the teenage market, revenue changes by €40 (approx.) when there is a one-unit change in hoodies, while it is €65 (approx.) in the student market. Without changing the total number of hoodies sold, what would you advise Elverys to do in order to maximise profit? (b) The cost of producing and selling a hoodie is €8, irrespective of what market it is sold in. Marginal revenue in the teenage market is 100-2Q, while marginal revenue in the student market is 80-4Q, where Q denotes the number of hoodies sold. How many hoodies should Elverys sell in each market in order to maximise profit? Use a diagram to complement your answer. 2. The daily inverse demand curve for taxi journeys from Maynooth to Liffey Valley shopping centre is P(Q)-40-3Q, where P is the price per journey, in €, and Q is the number of daily journeys. Assume that only two taxi companies currently operate in this taxi market. Each taxi journey costs €4 to provide. Suppose that the two taxi companies collude and agree to each provide half of the daily journeys that a monopoly taxi company would. Is this a blash equilibrium outcome, i.e. is such a collusive/cartel agreement stable, and, if not, what is the Nash equilibrium outcome? 3. The table below illustrates the marginal private benefit (MPB) of, and marginal external cost (MEC) caused by, North Kildare Construction Co. (NKCC) when building houses. Construction generates waste products that are dumped into the local river, thereby reducing water quality for users and damaging fish stocks. Assume that each house costs NKCC €120,000 to build and that there are no marginal external benefits to house building. Houses must be built as complete units. (In the table below, if the third house is built, there is a private benefit of €200,000 and a cost of €60,000 is imposed on the rest of society). House 1st 2nd 3rd 4th 5th 6th 7th 8th 9th MPB (€) 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 MEC (€) 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 (i) If North Kildare Construction Co. does not take into account the effects of its actions on others, how many houses will NKCC build to maximise profit? Complement your answer with a diagram. (ii) From society's perspective, how many houses should be built? Use the diagram in (a) to show this. 1. Elverys can split the market for Adidas hoodies into two easily identifiable groups, teenagers and 3rd level students. The cost of producing and selling a hoodie is identical in each market (a) Elverys decides to sell 80 hoodies in both markets. At this allocation, in the teenage market, revenue changes by €40 (approx.) when there is a one-unit change in hoodies, while it is €65 (approx.) in the student market. Without changing the total number of hoodies sold, what would you advise Elverys to do in order to maximise profit? (b) The cost of producing and selling a hoodie is €8, irrespective of what market it is sold in. Marginal revenue in the teenage market is 100-2Q, while marginal revenue in the student market is 80-4Q, where Q denotes the number of hoodies sold. How many hoodies should Elverys sell in each market in order to maximise profit? Use a diagram to complement your answer. 2. The daily inverse demand curve for taxi journeys from Maynooth to Liffey Valley shopping centre is P(Q)-40-3Q, where P is the price per journey, in €, and Q is the number of daily journeys. Assume that only two taxi companies currently operate in this taxi market. Each taxi journey costs €4 to provide. Suppose that the two taxi companies collude and agree to each provide half of the daily journeys that a monopoly taxi company would. Is this a blash equilibrium outcome, i.e. is such a collusive/cartel agreement stable, and, if not, what is the Nash equilibrium outcome? 3. The table below illustrates the marginal private benefit (MPB) of, and marginal external cost (MEC) caused by, North Kildare Construction Co. (NKCC) when building houses. Construction generates waste products that are dumped into the local river, thereby reducing water quality for users and damaging fish stocks. Assume that each house costs NKCC €120,000 to build and that there are no marginal external benefits to house building. Houses must be built as complete units. (In the table below, if the third house is built, there is a private benefit of €200,000 and a cost of €60,000 is imposed on the rest of society). House 1st 2nd 3rd 4th 5th 6th 7th 8th 9th MPB (€) 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 MEC (€) 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 (i) If North Kildare Construction Co. does not take into account the effects of its actions on others, how many houses will NKCC build to maximise profit? Complement your answer with a diagram. (ii) From society's perspective, how many houses should be built? Use the diagram in (a) to show this.

Answer rating: 100% (QA)

a Since revenue changes more in the student market than in the teenage market Elverys should reallocate some hoodies from the teenage market to the student market Specifically they should move hoodies ... View the full answer