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Production… Show more Consider the following competitive m

Paper help Economics Production… Show more Consider the following competitive m

Economics

Production… Show more Consider the following competitive m

Production… Show more Consider the following competitive market: Inverse of demand function: PD(Q) = AD – BDQ Production cost of each firm: TCFIRM(q) = (1/2)Mq2 + F Entering the market is free but there is an exit cost equal to phi Assume that profits per firm are – phi. a) Define an equilibrium for this environment. b) Solve for the equilibrium you defined in part a. c) The government wants to sell X units in this market. The cost it paid for those units is C and they were bought in a foreign market (local producers did not sell this units to the government). Define an equilibrium for this environment. d) Solve for the equilibrium you defined in part b. e) Perform a CBA of the project defined in part c. f) Assume that the government wants to impose a subsidy of s percent per unit traded. Define an equilibrium for this environment. g) Assume that the government wants to buy X units in this market to give it to the poor. Define an equilibrium for this environment. • Show less

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