Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 08 Nov 2017 My Price 7.00

unit of the good

1. (18 total points) Suppose there are 5 firms located equidistantly around a circle whose circumference is equal to 1. There are 100 consumers distributed uniformly around the circle. Each consumer gets utility U = 6 from buying a unit of the good from a firm which sells their ideal brand (a firm located at the consumerAc€?cs location). Also, the consumerAc€?cs utility decreases by 5 times the distance that the consumer is located from the firm. So a consumer who buys from firm i gets utility given by Ui = 6 Ac€?o 5xi where xi is the distance from the consumerAc€?cs location to firm iAc€?cs location. The consumerAc€?cs surplus from purchasing a unit of the good from firm i is the difference between their utility from purchasing a unit of the good from firm i and the price that firm i charges. So CS = Ui Ac€?o Pi. Also, the consumer has no alternatives, so the consumer will buy a unit of the good if maximum surplus gained from purchasing from any firm is greater than 0.

a) (6 points) Consider a particular firm denoted Firm 2. Let Firm 1 be the firm located on one side of Firm 2, and let Firm 3 be the firm located on the other side of Firm 2. Suppose Firm 1 and Firm 3 each charge a price equal to 2. Write a general expression for Firm 2Ac€?cs demand.

b) (4 points) Suppose Firm 2 can produce its good at constant marginal cost, MC = 2. What price should firm 2 charge if it wants to maximize its profit?

c) (4 points) Suppose the firm has no close neighbors so that it acts as a monopolist. Therefore it captures all of the consumers whose surplus is greater than or equal to 0. Write a general expression for the firmAc€?cs demand.

d) (4 points) Suppose the monopoly firm can produce its good at constant marginal cost, MC = 2. What price should it charge if it wants to maximize its profit?

Answers

Maurice Tutor
(5)
Status NEW Posted 08 Nov 2017 10:11 PM My Price 7.00

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