Question Suppose there are two types of consumers: Type A and Type B. The demands for a monopolist’s product for each type of consumers are given by: Type A : Q=100-4P Type B: Q=60-P Assume that marginal cost of production is constant and MC=4. There are NO fixed costs. a) If the monopolist is able […]
Question 2. (8 points) For Each of the following observations, check to see if the choices satisfy the Weak Axiom of Revealed Preference (WARP). If it does satisfy WARP, give as much information about the consumer’s ranking of the bundles as possible. If it violates WARP, simply write “It violates WARP”. a) Observation PX PY […]
Question 3) (12 points) Lynn has a utility function U(W) = W1/2, where W is the amount of wealth that she has. Lynn has two assets. She has $90,000 in a bank account, and she has a house worth $270,000, so her total wealth is initially $360,000. There is a 10% chance that her house […]
Question 4) (9 points) Suppose there are two firms in a market who each choose a quantity of output to produce. Firm 1’s quantity is q1, and firm 2’s quantity is q2. Firm 1 chooses their quantity, q1, first. Firm 2 observes q1, and then chooses their quantity, q2. The market quantity is Q = […]
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