In the fourth setup there are only two firms, but both of them provide both types...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In the fourth setup there are only two firms, but both of them provide both types of car. You might think of this as the two firms competing against each other in two markets. Each firm chooses two quantities to provide, given the two quantities chosen by the other firm. The two firms are identical. Demand functions for the total quantity of type 0 cars, and for the total quantity of type 1 cars are unchanged. The cost functions for producing the two types of car are also unchanged. (a) Write down an expression for a representative firm (You might need to introduce some new notation). (b) Take two first-order conditions for that firm. (c) What would the tax rates To, T1 have to equal, in order for the equi- librium quantities Qo, Q1 to be the same as the values you found in question 1(d)? (d) What is the intuition for your answer to question 4(c)? There are two types of car, distinguished by how fuel efficient they are. Type 0 is the less fuel efficient type, and type 1 is the more fuel efficient. The inverse demand curves for the two types of car are: Po = 250 – Qo – Q1/2, P = 120 – Q1 – Qo/2. (1) Cost functions are Co(Qo) = 50Q0, C:(Q1) = 20Q1 (2) respectively. 1. Until question 5, we consider a "feebate" or "Clean Car Discount". That generally means there would be a subsidy on the purchase of some cars, and a tax on others, but in the following analysis it will be possible to have taxes on both or subsidies on both. In the current question, assume that there are two monopolies, one for type 0 cars and one for type 1 cars. Mathematically, this is equivalent to a Cournot duopoly with differentiated goods. (a) Let type 0 cars be taxed at To = 20 per car sold, and type 1 cars be subsidised at 20 per car. To keep the notation consistent between the two types, this subsidy will be represented as a negative tax: T1 = -20. The profits of the monopolist for type 0 cars are (250- 50- 20 - Qo - Q1/2)Qo- Write down an expression for profits of the monopolist selling type 1 cars. (b) Take first-order conditions for the two monopolists. (c) Simultaneously solve your first-order conditions to find the equilibrium quantities sold of the two types of car. (d) What would To and T1 have to be set to, for the equilibrium quantitites to be Qo = 60, Q1 = 60? Note that while this is a bit different conceptually from what you have done before, it is simpler mathematically. Instead of having to simultantaneously solve the two conditions, you should be able to solve them one-by-one. Remember to replace -20 with -To in the expression for profits from type 0, and +20 with -Ti in the profits for type 1. In the fourth setup there are only two firms, but both of them provide both types of car. You might think of this as the two firms competing against each other in two markets. Each firm chooses two quantities to provide, given the two quantities chosen by the other firm. The two firms are identical. Demand functions for the total quantity of type 0 cars, and for the total quantity of type 1 cars are unchanged. The cost functions for producing the two types of car are also unchanged. (a) Write down an expression for a representative firm (You might need to introduce some new notation). (b) Take two first-order conditions for that firm. (c) What would the tax rates To, T1 have to equal, in order for the equi- librium quantities Qo, Q1 to be the same as the values you found in question 1(d)? (d) What is the intuition for your answer to question 4(c)? There are two types of car, distinguished by how fuel efficient they are. Type 0 is the less fuel efficient type, and type 1 is the more fuel efficient. The inverse demand curves for the two types of car are: Po = 250 – Qo – Q1/2, P = 120 – Q1 – Qo/2. (1) Cost functions are Co(Qo) = 50Q0, C:(Q1) = 20Q1 (2) respectively. 1. Until question 5, we consider a "feebate" or "Clean Car Discount". That generally means there would be a subsidy on the purchase of some cars, and a tax on others, but in the following analysis it will be possible to have taxes on both or subsidies on both. In the current question, assume that there are two monopolies, one for type 0 cars and one for type 1 cars. Mathematically, this is equivalent to a Cournot duopoly with differentiated goods. (a) Let type 0 cars be taxed at To = 20 per car sold, and type 1 cars be subsidised at 20 per car. To keep the notation consistent between the two types, this subsidy will be represented as a negative tax: T1 = -20. The profits of the monopolist for type 0 cars are (250- 50- 20 - Qo - Q1/2)Qo- Write down an expression for profits of the monopolist selling type 1 cars. (b) Take first-order conditions for the two monopolists. (c) Simultaneously solve your first-order conditions to find the equilibrium quantities sold of the two types of car. (d) What would To and T1 have to be set to, for the equilibrium quantitites to be Qo = 60, Q1 = 60? Note that while this is a bit different conceptually from what you have done before, it is simpler mathematically. Instead of having to simultantaneously solve the two conditions, you should be able to solve them one-by-one. Remember to replace -20 with -To in the expression for profits from type 0, and +20 with -Ti in the profits for type 1.
Expert Answer:
Related Book For
Elementary Statistics
ISBN: 978-0538733502
11th edition
Authors: Robert R. Johnson, Patricia J. Kuby
Posted Date:
Students also viewed these economics questions
-
In a small town there are only two AM radio stations, one at 920 kHz and one at 1280 kHz. What are the wave-lengths of the radio waves transmitted by each station?
-
In the Castorian Airline market there are only two firms. Each firm is deciding whether to offer a frequent flyer program. The annual profits (in millions of dollars) associated with each strategy...
-
There are only two firms in the widget industry. The total demand for widgets is 0 = 30 - 2P. The two firms have identical cost functions, TC = 3 + 10Q. The two firms agree to collude and act as...
-
On January 1, 2018, the general ledger of Big Blast Fireworks includes the following account balances: The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During...
-
Identify the location strategies for each of the following types of retailers. Department sorest Specialty apparel stores Category killers/specialists Grocery stores
-
Suppose a software producer is about to release a new version of its popular software. What information do you think it would take into account in forecasting initial sales?
-
In 2016, a father of two minor children in Cuyahoga county, Ohio, filed a claim to determine custody of the children. At the pretrial, the father informed the magistrate he wanted to be named a legal...
-
A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. Given that the retailer is an important customer, suppliers allow the firm...
-
Discuss each of the following terms: (a) data (b) database (c) database management system (d) database application program (e) data independence (f) security (g) integrity (h) views 2. What is...
-
The partnership of Bramble, Sunland, and Coronado engaged you to adjust its accounting records and convert them uniformly to the accrual basis in anticipation of admitting Kerns as a new partner....
-
Design an instrument, operating from space, to observe vehicles operating in the Arctic Circle area of the planet at night (winter). Assume you need to be able to differentiate headlights separated 2...
-
required : figure out the average annual return for each fund and for the 50/50 combination Edward, Blinken, and Ruth are triplets, but they have very different attitudes toward investing. Five years...
-
There is a measles epidemic in the U.S. and the Centers for Medicare and Medicaid (CMS) issued a measle vaccine requirements for healthcare workers and the Occupational Safety and Health...
-
You want to buy a $34,000 car. The company is offering a 5% interest rate for 36 months (3 years). What will your monthly payments be?
-
Q1. Your company is operating in the fast-food supply chain in Saudi Arabia, the board of directors of your company has recently appointed you to be the CEO of the company. Due to the recent changes...
-
Parvaneh is looking at buying the common stock of TBJ Energy Corp. Her stock assessment process is as follows: First she reviews TBJ's annual report in addition to several analyst reports that review...
-
a minor baseball team plays 80 games a season. if the team won 14 more than twice as many games as they lost, how many wins and loses did the team have? 1 answer
-
Sundial Technologies produces and sells customized network systems in New Brunswick. The company offers a 60-day, all software and labor-and an extra 90-day, parts-only- warranty on all of its...
-
Two dice are rolled. Find the probabilities in parts be. Use the sample space given in Example 4.3 (p. 175). a. Why is the set (2, 3, 4, .. , 12) not a useful sample space? b. P(white die is an odd...
-
A coin is flipped three times. a. Draw a tree diagram that represents all possible outcomes. b. Identify all branches that represent the event exactly one head occurred. c. Find the probability of...
-
Consider these two sets of data: Both sets have the same mean, 50. Compare these measures for both sets: SS(x), and range. Comment on the meaning of these comparisons. Set 46 55 50 47 52 Set 2 30 55...
-
On rare occasions, an organism may have three copies of a chromosome and therefore three copies of the genes on that chromosome (instead of the usual number of two copies). The alleles for each gene...
-
Explain how the miR-200 family of miRNAs behave as tumorsuppressor genes. What happens when their expression is blocked or decreased?
-
Outline the steps that occur when piRITS or piRISC silences transposable elements by repressing transcription and by directly inhibiting TE RNAs, respectively. What is the role of piRNAs in this...
Study smarter with the SolutionInn App