Question: Help me with all these questions 8-2. (Monopoly input supply) An upstream firm is the monopoly supplier of an input which it produces at constant



Help me with all these questions



8-2. (Monopoly input supply) An upstream firm is the monopoly supplier of an input which it produces at constant marginal and average cost 50 per unit and sells to two downstream firms. The downstream firms use one unit of the input, in combination with other inputs, to produce a final good that they supply to a market with inverse demand equation p = 1100- - (91 + 92) . The two downstream firms compete as Cournot duopolists. Downstream firm 1 has constant marginal and average cost 100 per unit of output for all inputs except the input produced by the upstream monopolist. Downstream firm 2 has constant marginal and average cost 200 per unit of output for all inputs except the input produced by the upstream monopolist. (a) Find the profit-maximizing input price w if the upstream firm must charge an identical price to both downstream firms. Find the equilibrium outputs of the downstream firms, the final good price, and the profits of all three firms. (b) The profit-maximizing input prices if the upstream firm is allowed to price discriminate are w1 = 525 to the first downstream firm and w2 = 475 to the second downstream firm. Find the equilibrium outputs of the downstream firms, the final good price, and the profits of all three firms.The below questions all pertain to the same numerical example that you will use to verify the One Monopoly Rent Theorem (\"INIRT\"). 1. Assume that a monopolist sells a critical input, \"E\Question 2 (3 points) (3 Marks) Assume everything is given in n=0, CONSTANT dollars unless otherwise stated: Hartsfield Company is considering purchasing a set of machine tools at a cost of $70,000. The purchase is expected to generate revenues of $30,000, increasing by 8% each year directly due to increasing sales volumes (reminder: all values are given as constant dollar values). The purchase of the tools will also lead to operating costs of $5,000 per year in each of the next three years. Additional profits will be taxed at a rate of 40%. The asset falls into CCA Class 45 (rate = 40%) for tax purposes and the 50% rule applies. The project has a three-y ar life. The constant-dollar market (re- sale) value of the machine tools is expected to be $10 ,000. The machine tools will be purchased 50% on debt (so 50% of the tools' cost will be borrowed). The debt will be paid off in equal annual payments over the life of the project. The interest rate on the debt was negotiated at 10% annually. The general inflation rate is 5% per year (and affects everything that it normally affects). Assume a MARR' =8%. (Remember to round up/down to whole dollar figures for EVERY entry in the income statement and cash flow statement. Solutions are also rounded to the nearest dollar. Note: .5 rounds up) The IRR' is between 13-14% 14-15% 15-16% 16-17% 17-18% hp
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
