Transcript Q = 22.5 – 1.5P - Personal.kent.edu

Three Competition Problems
Quantity Firm A Firm B Firm C
1
1
1
1
2
3
4
2
3
6
8
4
4
10
13
7
5
15
19
11
6
21
26
16
7
28
34
22
8 and 28 + 12
34+
22+
above per unit
13.5
10.5
per unit per unit
Lectures in Microeconomics-Charles W. Upton
Problem I
Three Competition Problems
The Facts
• Three firms. Cost
functions are as
shown.
• Demand is
Q = 22.5 – 1.5P
• Compute P, Q
Quantity Firm A Firm B Firm C
1
1
1
1
2
3
4
2
3
6
8
4
4
10
13
7
5
15
19
11
6
21
26
16
7
28
34
22
8 and 28 + 12
34+
22+
above per unit
13.5
10.5
per unit per unit
Three Competition Problems
The Facts
• Three firms. Cost Quantity Firm A
1
1
functions are as
2
3
P = 5, Q =315 6
shown.
4
10
• Demand is
5
15
Firm B Firm C
1
1
4
2
8
4
13
7
19
11
16
C26
34
22
34+
22+
13.5
10.5
per unit per unit
QA = 5, QB6 = 4,
=6
21 Q
Q = 22.5 – 1.5P
• Compute P, Q
7
28
8 and 28 + 12
above per unit
Three Competition Problems
Problem II
Three Competition Problems
The Facts
• A new technology is
about to reduce the
cost of making the
product to $10
• The cost structure for
existing plants is as
shown:
Quantity
0
1
2
3
4
5
Three Competition Problems
Total Cost
11
22
26
36
52
75
The Facts
15,000 units of this
• A product
new technology
is
are sold
about
to reduce
the $1
annually.
Each
cost
making
dropofin
pricethe
would
product
to $10annual
increase
demand
by 2,000
• The
cost structure
for
units.is as
existing plants
shown:
Quantity
0
1
2
3
4
5
Three Competition Problems
Total Cost
11
22
26
36
52
75
Questions
• What will be the price of the product when
the new innovation comes on the market?
What will be the total market when the new
innovation comes on the market?
• Over time, current plants will wear out and
leave the industry. When 3,000 remain,
what will be the annual production using the
new technology?
Three Competition Problems
Questions
• What will be the price of the product when
the new innovation comes on the market?
What will be the total market when the new
innovation comes on the market?
$10time, current plants will wear out and
• Over
leave the industry. When 3,000 remain,
what will be the annual production using the
new technology?
Three Competition Problems
$10
Questions
• What will be the price of the product when
the new innovation comes on the market?
What will be the total market when the new
innovation comes on the market?
• Over time, current plants will wear out and
leave the industry. When 3,000 remain,
what will be the annual production using the
19000
new technology?
Three Competition Problems
$10
Questions
10000
• What will be the price of the product when
the new innovation comes on the market?
19000
What will be the total market when the new
innovation comes on the market?
• Over time, current plants will wear out and
leave the industry. When 3,000 remain,
what will be the annual production using the
new technology?
Three Competition Problems
Problem III
Three Competition Problems
The Basics
• Demand is
Q = 3900 – 100P
• What level of output
minimizes AC?
• What will be the
price and total sales
of widgets?
• How many plants ?
Quantity
Three Competition Problems
1
2
3
4
5
Total Cost
33
42
54
78
105
Answers
• Demand is
Q = 3900 – 100P
• What level of output
minimizes AC? 3
• What will be the price and
total sales of widgets?
Quantity
$18, 2100
• How many plants ? 700
Three Competition Problems
1
2
3
4
5
Total Cost
33
42
54
78
105
End
©2006 Charles
W. Upton
Three Competition Problems