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Price Theory

  Market Power Assignment Help

Price Theory<Assignment 2 { Market Power Two rms produce a homogeneous product. Market demand for the product is given by the equation, Qd=500000-800P Firms 1 and 2 have marginal costs of MC 1= 65 and MC2= 120 respectively. Firms compete by simultaneously selecting the quantity of output that they will produce for sale in the market Question 1: Rearrange the demand function to nd inverse demand for this market. (2 Marks) Question 2: Find the residual demand function for each rm, and the corresponding marginal revenue func... More

  Price Theory

Price Theory Assignment 1 { Consumer Theory Carbon dioxide (CO2) is emitted when drivers use petrol to power their cars. CO2 emis- sions are a negative externality of petrol use, as they contribute to global warming. One way to correct this market failure is to levy a corrective tax (also known as a Pigovian tax) on petrol. Suppose that Sally has an income of $300 per week. Sally's utility is given by the function U(x; y) = pxy, where x is the quantity of petrol (measured in litres), and y is the quantity of the composite good. The marg... More