Problem sets for Microeconomics II [110051-0471]

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supply curve found in part a. (Of course, Q S is a function of P.) Write down the profit expression and maximize profit with respect to P. Find the firm’s optimal price. Give a brief explanation for this price. 16
6 Oligopolistic competition Exercise 6.1. The OPEC cartel is trying to determine the total amount of oil to sell on the world market. It estimates world demand for oil to be Q W = 60 − .5P, Q W denotes the quantity of oil (in millions of barrels per day) and P is price per barrel. The cartel’s marginal cost is approximately $20 per barrel. a. Determine OPEC’s profit-maximizing output and price. b. OPEC’s economists recognize the importance of non-OPEC oil supplies. These can be described by the estimated supply curve Q S = 1.5P − 20. Write OPEC’s net demand curve. Find its optimal output and price. What portion of the world’s total oil supply comes from OPEC Exercise 6.2. Firm A is the dominant firm in a market where industry demand is given by Q D = 48 − 4P. There are four “follower” firms, each with long-run marginal cost given by MC = 6 + Q F . Firm A’s long run marginal cost is 6. a. Write the expression for the total supply curve of the followers (Q S ) as this depends on price. b. Find the net demand curve facing firm A. Determine A’s optimal price and output. How much output do the other firms supply in total Exercise 6.3. In the small town there are two confectioneries: one of the Mr Long and one of the Mr Short. Nobody can tell the cakes from those confectioneries apart. The marginal costs of Mr Long are constant - $1 per cake. Mr Short has constant marginal costs of $2 per cake. There are no fixed costs. The inverse demand function is p(q) = 6–.01q , where q is the sum of the cakes sold by both confectionery owners. a. Find the reaction functions, quantities and profits in the equilibrium, assuming that confectionery owners competition is of Cournot type. b. Find the quantities and profits in the equilibrium, assuming that confectionery owners competition is of Bertrand type. c. Assume that Mr Long is a leader of Stackelberg type competition (Probably due to fact, that he starts working an hour earlier than Mr Short.) Find the quantities and profits in the equilibrium. 17
Page 1 and 2: Problem sets for Microeconomics II
Page 3 and 4: a. If BQ sets the price and weekly
Page 5 and 6: . The chief financial officer appro
Page 7 and 8: . How many fishers will settle at e
Page 9 and 10: Exercise 3.12. Flo is a university
Page 11 and 12: endorse it 90 percent of the time,
Page 13 and 14: 5 Perfect competition and monopoly
Page 15: a. What is OPEC’s optimal level o
Page 19 and 20: . In each table, predict the exact
Page 21: . Suppose, instead, that the airlin

Problem sets for Microeconomics II [110051-0471]

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