I need help with the following

 

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 = 1400 – 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 $200 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

 

 

b.     Say you are the only producer in the industry and you are a first-degree price discriminator who can charge a different price to every buyer along the demand curve.  What will be the prices you charge and how many airplanes will you sell? Either calculate the profits you will earn or show the area of profits on a graph. (5 points)

 

Price or Prices ____________

 

 

Quantity ______________.

 

 

Profits __________.

 

 

Space for Calculations and Graph.

 

 

 

 

 

 

 

 

 

c.     Say instead that you are a Stackelberg leader and Plano is a follower. Plano’s marginal cost of producing airplanes is 200 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 $400 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.

• 1498092820-O-MBA-ECON-550-Assignment-Submission.Form.Week-6-Oligopoly 2.docx

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Status NEW Posted 22 Jun 2017 12:06 AM My Price 8.00

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