Three firms have identical revenue and profit functions with the same general shape as those in figure Firm 1 is a private sector firm operated by an owner- manager who wishes to maximize profit. Firm 2 is managed by an income- maximizing manager whose pay is proportional to the firm’s revenue. Firm 3 is a government- owned firm that has been instructed to maximize the amount of employment, L, subject to the constraint that revenue must not be negative. To increase q, L must increase. Which of these firms produces the most, which the least, and which is in the middle? Show the output level of each firm in a diagram.
Answer to relevant QuestionsEach of the three firms in Question 3.3 has a revenue function R(q) = 100q – 2q2 and a cost function C(q) = 100 + 20q. Determine how much output each firm chooses. C An acquiring firm, A, seeks to buy a target firm, T. The acquiring firm has better managers. The value of the target firm, if acquired by A, is $ 100 million. The value of the target firm under its current management is only ...A large city has nearly 500 restaurants, with new ones entering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. Which characteristics of this market are consistent with ...Beta Laundry’s cost function is C(q) = 30 + 20q + q2.a. What quantity maximizes the firm’s profit if the market price is p? How much does it produce if p = 60? b. If the government imposes a specific tax of t = 2, what ...The “Upward-Sloping Long-Run Supply Curve for Cotton” Mini-Case shows a supply curve for cotton. Discuss the equilibrium if the world demand curve crosses this supply curve in either (a) a flat section labeled Brazil or ...
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