You are building airplanes. Because it takes a long time to build a plane, you make...

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You are building airplanes. Because it takes a long time to build a plane, you make your output decisions before the demand information is actually revealed. The best prediction of what the demand for airplanes will be next year is a demand curve where: P = 1000-Q, Where P is the market price and Q is the total output in the market from all suppliers. In all parts of the question you face a constant marginal cost equal to average cost of $100 for every plane you produce. Answer each of the following questions. Explain your answers and show your work. You should be able to come up with numerical answers. Partial credit will be awarded if you offer graphical and intuitive answers to the questions. a. Say you are the only producer in the industry. If you can charge only one price to all buyers, what quantity will you choose and what will be the price you receive for airplanes? What will be your economic profits? (3 points) Quantity Price: Economic Profit Space for Calculations. Explain what you are doing. b. Say you are in a Cournot oligopoly and you compete with Plano. You both choose quantity simultaneously, and then the price is determined. Like you, Plano has a marginal cost of $100 for every plane produced. The demand is P = 1000-Q1-Q2. Q1 is your output and Q2 is Plano's output. What quantity of airplanes will you produce? What quantity will Plano produce? What will be the market price of airplanes? How much will each of you earn in profits? (5 points) Your Quantity Plano's Quantity. Price Your Profits Plano's Profits Space for Calculations. Explain what you are doing. C. Say instead that you are a Stackelberg leader and Plano is a follower. Plano's marginal cost of producing airplanes is 100 per plane. What quantity of airplanes will you produce? What quantity will Plano produce? What will be the market price of airplanes? How much will each of you earn in profits? (6 points) Your quantity of Airplanes: Plano's quantity Market Price of Planes Your profit Plano's profit Calculations. Explain what you are doing. d. Consider an alternative situation where instead of choosing quantity and allowing the auctioneer to set the price, you and Plano compete by choosing price, as in Bertrand. Plano has a marginal cost of $300 per plane. What will be the market price in this setting? What will be your output choice, Plano's output, and each of your profits? (6 points). Market Price: Your output: Plano's output: Your profit: Plano's profit. Calculations and Graph if needed. You are building airplanes. Because it takes a long time to build a plane, you make your output decisions before the demand information is actually revealed. The best prediction of what the demand for airplanes will be next year is a demand curve where: P = 1000-Q, Where P is the market price and Q is the total output in the market from all suppliers. In all parts of the question you face a constant marginal cost equal to average cost of $100 for every plane you produce. Answer each of the following questions. Explain your answers and show your work. You should be able to come up with numerical answers. Partial credit will be awarded if you offer graphical and intuitive answers to the questions. a. Say you are the only producer in the industry. If you can charge only one price to all buyers, what quantity will you choose and what will be the price you receive for airplanes? What will be your economic profits? (3 points) Quantity Price: Economic Profit Space for Calculations. Explain what you are doing. b. Say you are in a Cournot oligopoly and you compete with Plano. You both choose quantity simultaneously, and then the price is determined. Like you, Plano has a marginal cost of $100 for every plane produced. The demand is P = 1000-Q1-Q2. Q1 is your output and Q2 is Plano's output. What quantity of airplanes will you produce? What quantity will Plano produce? What will be the market price of airplanes? How much will each of you earn in profits? (5 points) Your Quantity Plano's Quantity. Price Your Profits Plano's Profits Space for Calculations. Explain what you are doing. C. Say instead that you are a Stackelberg leader and Plano is a follower. Plano's marginal cost of producing airplanes is 100 per plane. What quantity of airplanes will you produce? What quantity will Plano produce? What will be the market price of airplanes? How much will each of you earn in profits? (6 points) Your quantity of Airplanes: Plano's quantity Market Price of Planes Your profit Plano's profit Calculations. Explain what you are doing. d. Consider an alternative situation where instead of choosing quantity and allowing the auctioneer to set the price, you and Plano compete by choosing price, as in Bertrand. Plano has a marginal cost of $300 per plane. What will be the market price in this setting? What will be your output choice, Plano's output, and each of your profits? (6 points). Market Price: Your output: Plano's output: Your profit: Plano's profit. Calculations and Graph if needed.

Answer rating: 100% (QA)

Id be glad to help you with this airplane manufacturing scenario Part a Monopoly Your Quantity 500 airplanes Price 500 Economic Profit 200000 Explanat... View the full answer