nicholson微观经济理论（答案+ppt+习题库）-260-03-033593-0

709BRIEFANSWERSTOQUERIESTHEFOLLOWINGBRIEFANSWERSTOTHEQUERIESTHATACCOMPANYEACHEXAMPLEINTHETEXTMAYHELPSTUDENTSTESTTHEIRUNDERSTANDINGOFTHECONCEPTSBEINGPRESENTEDCHAPTER111IFPH110055,QDH11005950,ANDQSH11005500THEREWOULDBEEXCESSDEMAND,ANDSOMETYPEOFRATIONINGWOULDBEREQUIRED12IFXH11005999,YH110055040IFXH110051001,YH110054959H11005,WHICHISCLOSETOH110024CALCULUSRESULTSCANONLYBEAPPROXIMATEDBYDISCRETECHANGESCHAPTER221SINCEH9266H110052,000H20857LH33526H1100220L,PROTMAXIMIZATIONREQUIRES1,000/H20857LH33526H1100520SOLH110052,500,QH1100510022THESEWOULDBECONCENTRICCIRCLESCENTEREDATX1H110051,X2H110052FORYH1100510,THE“CIRCLE”ISASINGLEPOINT23FORDIFFERENTCONSTANTS,EACHPRODUCTIONPOSSIBILITYFRONTIERISASUCCESSIVELYLARGERQUARTERCIRCLECENTEREDATTHEORIGIN24H11128Y/H11128BH110050BECAUSEX1WOULDALWAYSBESETATBFOROPTIMALITY25WITHX1H11001X2H110052,X1H1100505,X2H1100515NOWYH1100595FORX1H11001X2H113503,THEUNCONSTRAINEDOPTIMUMISATTAINABLE26ACIRCULARELDENCLOSESMAXIMALAREAFORMINIMUMPERIMETERPROOFREQUIRESALIMITARGUMENT27THELOCALMAXIMUMISALSOAGLOBALMAXIMUMHERETHECONSTANCYOFTHESECONDDERIVATIVEIMPLIESTHESLOPEOFTHEFUNCTIONDECREASESATACONSTANTRATE28THISFUNCTIONRESEMBLESANINVERTEDCONETHATHASONLYONEHIGHESTPOINTH11002081H500702H9004YH5007H9004X710BRIEFANSWERSTOQUERIES29THISISAQUASICONCAVEFUNCTIONITHASNOUNCONSTRAINEDOPTIMALVALUEBECAUSECONTOURLINESARERECTANGULARHYPERBOLAS,CRITICALPOINTSOFTHELAGRANGIANARELOCALMAXIMACHAPTER331THEDERIVATIONHEREHOLDSUTILITYCONSTANTTOCREATEANIMPLICITRELATIONSHIPBETWEENYANDXCHANGESINXALSOIMPLICITLYCHANGEYBECAUSEOFTHISRELATIONSHIPEQUATION31132THEMRSISMEASUREDINUNITSOFYPERUNITOFXINCALCULATINGMUX/MUY,THEUNITSOFUTILITYMEASUREMENTCANCELOUT,LEAVINGA“YPERX”MEASUREHEREHAMBURGERSPERSOFTDRINK33FORHOMOTHETICFUNCTIONS,THEMRSISTHESAMEFOREVERYPOINTALONGAPOSITIVELYSLOPEDRAYTHROUGHTHEORIGIN34THEINDIFFERENCECURVESHEREARE“HORIZONTALLYPARALLEL”THATIS,FORANYGIVENLEVELOFY,THEMRSISTHESAMENOMATTERWHATTHEVALUEOFXISONEIMPLICATIONOFTHISASWESHALLSEEINCHAPTER4ISTHATTHEEFFECTOFADDITIONALINCOMEONPURCHASESOFGOODYISZEROALLEXTRAINCOMEISCHANNELEDINTOTHEGOODWITHCONSTANTMARGINALUTILITYGOODXCHAPTER441CONSTANTSHARESIMPLYH11128X/H11128PYH110050ANDH11128Y/H11128PXH110050NOTICEPYDOESNOTENTEREQUATION423PXDOESNOTENTER42442BUDGETSHARESARENOTAFFECTEDBYINCOME,BUTTHEYAREAFFECTEDBYCHANGESINRELATIVEPRICESTHISISTHECASEFORALLHOMOTHETICFUNCTIONS43SINCEADOUBLINGOFALLPRICESANDNOMINALINCOMEDOESNOTCHANGETHEBUDGETCONSTRAINT,ITWILLNOTCHANGEUTILITYINDIRECTUTILITYISHOMOGENEOUSOFDEGREEZEROINALLPRICESANDNOMINALINCOME44YES,ALLEXPENDITUREFUNCTIONSAREHOMOGENEOUSOFDEGREEONEINPRICESSINCEADOUBLINGOFALLPRICESWOULDPRECISELYDOUBLEEXPENDITURESREQUIREDTOREACHUBECAUSERELATIVEPRICESWOULDNOTCHANGE,THISPERSONWOULDCHOOSETHESAMECOMMODITYBUNDLEBEFOREANDAFTERTHEPRICERISECHAPTER551THESHARESEQUATIONSCOMPUTEDFROMEQUATIONS54OR56SHOWTHATTHISINDIVIDUALALWAYSSPENDSALLOFHISORHERINCOMEREGARDLESSOFPX,PY,ANDITHATIS,THESHARESSUMTOONE52IFXH110055I/PX,IH11005100,PXH110051IMPLIESXH1100550INEQUATION511XH110055100/1H1100550ALSOIFPXRISESTO20,THECOBBDOUGLASPREDICTSXH1100525THECESIMPLIESXH11005100/6H110051667THECESISMORERESPONSIVETOPRICE53SINCEPROPORTIONALCHANGESINPXANDPYDONOTINDUCESUBSTITUTIONEFFECTS,HOLDINGVCONSTANTIMPLIESTHATXANDYWILLNOTCHANGETHATSHOULDBETRUEFORALLCOMPENSATEDDEMANDFUNCTIONS54ACHANGEINPYWOULDHAVEEQUALSUBSTITUTIONANDINCOMEEFFECTSINTHEDEMANDFORYTHEEFFECTONXDEMANDWOULDBEINCOMEANDSUBSTITUTIONEFFECTSOFTHESAMESIZE,BUTOPPOSITEINSIGNHENCE,XCONSUMPTIONDOESNOTCHANGEWHENPYCHANGES55ONEMIGHTASSUMEXH110050FORPXSUFCIENTLYHIGHIF,FOREXAMPLE,ITISASSUMEDTHATXH110050FORPXH110224,THENTOTALCONSUMERSURPLUSISDERIVEDFROMEQUATION551BYINTEGRATINGFROM25TO4TOTALSURPLUSIS6STILL,ITMIGHTBEBETTERTOSTICKTOANALYZINGSMALLCHANGESBECAUSETHETOTALMEASUREISDEPENDENTONWHATUPPERLIMITPRICEWECHOOSECHAPTER661SINCEH11128X/H11128PYINCLUDESBOTHINCOMEANDSUBSTITUTIONEFFECTS,THISDERIVATIVECOULDBEZEROIFTHEEFFECTSOFFSETEACHOTHERTHECONCLUSIONTHATH11128X/H11128PYH110050IMPLIESTHEGOODSMUSTBEUSEDINXEDPROPORTIONSWOULDHOLDONLYIFTHEINCOMEEFFECTOFTHISPRICECHANGEWEREZERO62ASYMMETRYCANOCCURWITHHOMOTHETICPREFERENCESSINCE,ALTHOUGHSUBSTITUTIONEFFECTSARESYMMETRIC,INCOMEEFFECTSMAYDIFFERINSIZE63SINCETHERELATIONSHIPBETWEENPY,PZ,ANDPHNEVERCHANGES,THEMAXIMIZATIONPROBLEMWILLALWAYSBESOLVEDTHESAMEWAYCHAPTER771IFI1WEREALWAYSINACONSTANTRATIOTOI2,THEDEMANDWOULDBEASTABLEFUNCTIONOFI1H11001I2HERE,DIFFERINGCOEFCIENTSFORPYWOULDNOTAFFECTTHESTABILITYOFTHEMARKETDEMANDCURVE72USEEQUATION739WITHH9251H11005H9252H110055,ESX,PXH11005ESY,PYH11005H110025WITHH9251H110053,H9252H110057,ESX,PXH11005H110027,ESY,PYH11005H110023SINCETHEUNCOMPENSATEDPRICEELASTICITYISUNITYFORBOTHGOODSINTHECOBBDOUGLAS,THESMALLERINCOMEEFFECTWHENH9251H110053MUSTBEBALANCEDBYALARGERSUBSTITUTIONEFFECTANDVICEVERSA73SINCEEXPENDITURESINCREASEFORAFALLINPWHENDEMANDISELASTIC,EXPENDITURESAREASLARGEASPOSSIBLEWHENEQ,PH11005H110021EQUATION744SHOWSTHISOCCURSWHENPH11005674THISISHOMOGENEOUSOFDEGREEZEROBECAUSETHESUMOFTHEELASTICITIESEXPONENTSISZEROSEEALSOEQUATION731CHAPTER881IFLNXIH110052I,THEPARADOXCANBEREGENERATED82WITHLINEARUTILITY,THEINDIVIDUALWOULDCAREONLYABOUTEXPECTEDDOLLARVALUESANDWOULDBEINDIFFERENTABOUTBUYINGACTUARIALLYFAIRINSURANCEWHENUTILITYUISACONVEXFUNCTIONOFWEALTHUH110220,UH11033H110220,THEINDIVIDUALPREFERSTOGAMBLEANDWILLBUYINSURANCEONLYIFITCOSTSLESSTHANISACTUARIALLYJUSTIED83THERISKAVERSIONPARAMETERA,THESIZEOFTHEGAMBLE,ANDTHEINSURANCECOSTFALLENTERTHEEXPONENTIALUTILITYFUNCTIONINAMULTIPLICATIVEWAY84WILLINGNESSTOPAYISADECLININGFUNCTIONOFWEALTHEQUATION842WITHRH110050WILLPAY50TOAVOIDA1,000BETIFW0H1100510,000,BUTONLY5IFW0H11005100,000WITHRH110052WILLPAY149TOAVOIDA1,000BETIFW0H1100510,000,BUTONLY15IFW0H11005100,00085THEACTUARIALLYFAIRPRICEFORSUCHAPOLICYIS25H1108019,000H110054,750THEMAXIMUMAMOUNTTHEINDIVIDUALWOULDPAYXSOLVESTHEEQUATION1145714H1100575LN100,000H11002XH1100125LN99,000H11002XSOLVINGTHISYIELDSANAPPROXIMATEVALUEOFXH110055,120THISPERSONWOULDBEWILLINGTOPAYUPTO370INADMINISTRATIVECOSTSFORTHEDEDUCTIBLEPOLICYBRIEFANSWERSTOQUERIES711CHAPTER991ALTHOUGHPRICEISUNCERTAIN,THEMODELHEREALLOWSTHEINDIVIDUALTOBUYMOREYWHENHEORSHEENCOUNTERSALOWPRICEANDLESSWHENAHIGHPRICEISENCOUNTEREDBECAUSEVISACONVEXFUNCTIONOFPY,THEMEANOFVFORTWODIFFERENTVALUESOFPYEXCEEDSTHEVALUEOFVATTHEMEANOFPYTHISHASNORELATIONSHIPTORISKAVERSION,WHICHCONCERNSCHOICESAMONGOPTIONSWITHTHESAMEEXPECTEDVALUE92NOWINSURANCECOSTS5,300WITHNODEVICEAND3,300WITHADEVICEUTILITYWITHINSURANCEANDNODEVICEISLN94,700H11005114589SOTHEINDIVIDUALPREFERSTOINSTALLTHEDEVICEBUTBUYNOINSURANCE93ASSUMINGONLYFULLCOVERAGEPOLICIESAREOFFERED,WENEEDTONDTHEVALUEOFXFORWHICHLN97,000H11002XH11005114794THEVALUEOFUTILITYFORLOWRISKINDIVIDUALSWITHOUTINSURANCESOLVINGTHISEQUATIONYIELDSXH11005297TONDWHATAFORGEDCERTICATEMUSTCOSTY,WEUSELN97,000H11002YH11349114616THEUTILITYFROMFULLCOVERAGEUNDERAHIGHRISKPOLICYSOLVINGTHISINEQUALITYYIELDSYH113502,003CHAPTER10101NONEOFTHESTRATEGIESISDOMINANTSEPARATEVACATIONSARENOTNASHEQUILIBRIABECAUSEBOTHSPOUSESHAVEANINCENTIVETOSWITCH102EXPECTEDUTILITYISTWOTHIRDSFOREACHPLAYERWITHTHEMIXEDSTRATEGIESLOWERTHANTHATPROMISEDBYEITHEROFTHEOTHERNASHEQUILIBRIATHISWOULDNOTBEACOOPERATIVEOUTCOME103SEEEXAMPLE104104H9254H1102293IMPLIESAONEPERIODINTERESTRATEOFLESSTHAN7WITHPERIODSOFDAYS,WEEKS,ORMONTHSTHISSEEMSQUITELIKELYCHAPTER11111NOWWITHKH1100511QH1100572,600L2H110021,331L3MPLH11005145,200LH110023,993L2APLH1100572,600LH110021,331L2INTHISCASE,APLNOWREACHESITSMAXIMALVALUEATLH11005273RATHERTHANATLH1100530112IFKH11005L,SINCEKANDLENTERFSYMMETRICALLY,FKH11005FL,FKKH11005FLLHENCE,THENUMERATOROFEQUATION1121WILLBENEGATIVEIFFKLH11022FLLCOMBININGEQUATIONS1124AND1125ANDREMEMBERINGKH11005LSHOWSTHISHOLDSFORKH11005LH1102120113SINCETHECOBBDOUGLASISAHOMOGENEOUSFUNCTIONNOMATTERWHATTHESUMOFTHEEXPONENTS,ITISALWAYSHOMOTHETICTHEISOQUANTMAPISARADIALBLOWUPOFTHEUNITISOQUANTWITHINCREASINGRETURNSTOSCALE,THEISOQUANTSFORGIVENINCREMENTSOFOUTPUTGETCLOSERTOGETHERASOUTPUTEXPANDS,WHEREASWITHDECREASINGRETURNSTHEYGETFURTHERAPART114USINGEQUATION1153,Q/LH11005165K/L5IFKH1100510,Q/LH11005522/L5IFQ/LH1100510K/L5,WOULDNEEDKH11005272TOGETTHESAMEAVERAGEPRODUCTIVITYFUNCTIONCHAPTER12121NOWRTSH11005MPL/MPKH110054/12H110051/3H11005K/LWITHLH110053K,QH1100540H1100510KH208573H33526SOKH110054/H208573H33526,LH1100512/H208573H33526,MPKH110055/H208573H33526,MPLH110055H208573H33526/3712BRIEFANSWERSTOQUERIES122EACHELASTICITYISONEHALFBECAUSEEACHINPUTCONSTITUTESONLYONEHALFOFTOTALCOSTTHESEARENOTAFFECTEDBYTECHNICALPROGRESS123BECAUSECAPITALCOSTSAREXEDINTHESHORTRUN,THEYDONOTAFFECTSHORTRUNMARGINALCOSTSINMATHEMATICALTERMS,THEDERIVATIVEOFACONSTANTISZEROCAPITALCOSTSDO,HOWEVER,AFFECTSHORTRUNAVERAGECOSTSINFIGURE1215ANINCREASEINVWOULDSHIFTMC,AC,ANDALLOFTHESATCCURVESUPWARD,BUTWOULDLEAVETHESMCLINESUNAFFECTEDCHAPTER13131IFMCH110055,PROTMAXIMIZATIONREQUIRESQH1100525NOWPH11005750,TRH1100518750,TCH11005125,ANDH9266H110056250132FACTORSOTHERTHANPCANBEINCORPORATEDINTOTHECONSTANTTERMATHESEWOULDSHIFTDANDMRBUTWOULDNOTAFFECTTHEELASTICITYCALCULATIONS133ANINCREASEINVWOULDNOTSHIFTTHESHORTRUNMARGINALCOSTCURVEANDWOULDNOTALTERSHORTRUNSUPPLYDECISIONSTHOUGHITMIGHTAFFECTTHEDECISIONSOFTHERMTOSTAYINBUSINESSANINCREASEINWTO5WOULDSHIFTSHORTRUNMARGINALCOSTTOSMCH11005Q/40134ANINCREASEINFWOULDSHIFTTHESHORTRUNSUPPLYFUNCTIONOUTWARDMOREOUTPUTWOULDBESUPPLIEDATEACHPRICEOPTIMALFWOULDBEFOUNDVIAANENVELOPEPROCEDURESIMILARTOTHATUSEDINEXAMPLE123135EQUATION1343DERIVESTHESHORTRUNSUPPLYFUNCTIONASQH11005100PIFPH110051,H9266H1100550H11002RANDSHORTRUNPRODUCERSURPLUSISPSH11005H9266H11001RH1100550INTEGRATIONOFTHESUPPLYFUNCTIONGIVESPSH1100550P2IFPH110051,PSH1100550IFPH1100515,PSH110051125136INCREASINGQFROM30TO50INCREASESREVENUEBUTREDUCESPROTSAUTILITYMAXIMIZINGCHOICEWOULDCONSISTOFOPTINGFORTHEPREFERREDPAIRAMONGTHESEOPTIONS137INTHISCASETHEOWNERSWOULDHAVETOSTRUCTUREACONTRACTBASEDONTHEIRASSESSMENTOFTHEPROBABILITYOFINAPPROPRIATEJETUSAGEGIVENTHEOBSERVEDVALUEOFPROTSCHAPTER14141HERETHESUPPLYCURVEISLINEARANDPASSESTHROUGHTHEORIGINITWILLALWAYSHAVEUNITARYELASTICITYSINCECHANGESINTHEWAGEONLYCHANGETHESLOPEINCASESWHERETHESUPPLYCURVEHASANINTERCEPTASHUTDOWNPRICEORISNONLINEAR,THESUPPLYELASTICITYMAYNOTBETHESAMEATALLPOINTS,ANDITMAYBEAFFECTEDBYINPUTCOSTS142THESHIFTINDEMANDCAUSESAMOVEALONGTHESUPPLYCURVEA20PERCENTRISEINPRICERESULTSINA20PERCENTRISEINQUANTITYTHESHIFTINSUPPLYIMPLIESTHATTHEDEMANDELASTICITYISAPPROXIMATELYH1100210AN11PERCENTRISEINPRICERESULTSINAN11PERCENTFALLINQUANTITYFORTHECASESDESCRIBEDINTHEFOOTNOTE,HOWEVER,EQ,PISAPPROXIMATELYH110022INCASEIANDAPPROXIMATELYH1100202INCASEII143FOLLOWINGSTEPSSIMILARTOTHOSEUSEDTODERIVEEQUATION1432YIELDSEP,H9252H11005HEREEQ,H9252H11005EQ,WH11005H110025SOEP,H9252H11005H11005227MULTIPLICATIONBY20SINCEWAGESROSE20PERCENTPREDICTSAPRICERISEOF45PERCENT,VERYCLOSETOTHEGUREINTHEEXAMPLEH11002H110025H500722H11002EQ,H9252H5007H5007ES,PH11002EQ,PBRIEFANSWERSTOQUERIES713144THESHORTRUNSUPPLYCURVEISGIVENBYQSH110055PH11001750,ANDTHESHORTTERMEQUILIBRIUMPRICEIS643EACHRMEARNSAPPROXIMATELY2,960INPROTSINTHESHORTRUN145TOTALANDAVERAGECOSTSFOREQUATION1456EXCEEDTHOSEFOREQUATION1443FORQH11022159MARGINALCOSTSFOREQUATION1456ALWAYSEXCEEDTHOSEFOREQUATION1443OPTIMALOUTPUTISLOWERWITHEQUATION1456THANWITHEQUATION1443BECAUSEMARGINALCOSTSINCREASEMORETHANAVERAGECOSTSCHAPTER15151LOSSESFROMAGIVENRESTRICTIONINQUANTITYWILLBEGREATERWHENSUPPLYAND/ORDEMANDISLESSELASTICTHEACTORWITHTHELEASTELASTICRESPONSEWILLBEARTHEGREATERSHAREOFTHELOSS152ANINCREASEINTUNAMBIGUOUSLYINCREASESDEADWEIGHTLOSSBECAUSEINCREASESINTREDUCEQUANTITY,HOWEVER,TOTALTAXREVENUESARESUBJECTTOCOUNTERVAILINGEFFECTSINDEED,IFT/PH11001TH11350H110021/EQ,P,THENDTQ/DTH110210153TOTALTRANSFERTODOMESTICPRODUCERSISINBILLIONS5H11080117H110015507H11005603THISWOULDBEGAINEDASRENTSTOTHOSEINPUTSTHATGIVETHEAUTOSUPPLYCURVEITSPOSITIVESLOPEWITHAQUOTA,DOMESTICPRODUCERSMAYALSOBEABLETOGAINSOMEPORTIONOFWHATWOULDHAVEBEENTARIFFREVENUECHAPTER16161SETRPTH11005DY/DXH110051/4HENCE,X/4YH110051/4SOXH11005YSUBSTITUTINGINTOEQUATION166YIELDSXH11005YH11005H2085720H33526162CLEARLY,XH1100510,YH110050ORXH110050,YH110055AREINFERIORSINCEFORTHESEUH110050WITHXH110055,YH11005433,UH110052167,WHICHISALSOINFERIORTOTHEMAXIMUMUTILITY163NOWMRSH11005Y/3XEQUATINGTHISTOTHERPTANDSUBSTITUTINGINTOTHEPRODUCTIONPOSSIBILITYFRONTIERYIELDSXH110055,YH11005433THERELATIVEPRICEOFGUNSFALLSTOPX/PYH11005028164WALRASSLAWENSURESTHATTHESILVERMARKETISINEQUILIBRIUMRECALCULATINGEQUATION1640GIVESED1H110052P2/P12H110012P3/P12H110024P2/P1H110027P3/P1OR,ATTHENEWRELATIVEPRICES,H11005232H11001222H1100243H1100272H110050CHAPTER17171BECAUSEEACHPRODUCTIONFUNCTIONEXHIBITSCONSTANTRETURNSTOSCALE,ANYALLOCATIONOFCAPITALWILLBEEFCIENTIFLABORISALLOCATEDAPPROPRIATELY172ANYOUTPUTCOMBINATIONFORENGLANDSHORTOFCOMPLETESPECIALIZATIONRESULTSINLOSSOFBOTHOUTPUTSWITHCONCAVEFRONTIERS,COMPLETESPECIALIZATIONWOULDBEUNLIKELYBECAUSETHERELATIVEMARGINALCOSTOFEITHERGOODINCREASESASMORERESOURCESAREDEVOTEDTOIT173INEFCIENCYCOULDBEMEASUREDBYTHEUTILITYLOSSINVOLVEDASSUMINGUTILITYMEASUREMENTISMEANINGFULFORXH110058,YH110053,THELOSSIS5H11002H2085724H33526H11005010FORXH110055,YH11005433,THELOSSIS5H11002H208572167H33526H1100534174INTHISCASE,THESEQUENCEOFPRICESWOULDBEP2H11005211,P3H11005193,P4H11005199SOTHECONVERGENCETOEQUILIBRIUM,WHILEDIFFERENT,ISNOTMUCHSLOWERTHANINTABLE171714BRIEFANSWERSTOQUERIES175THEINDIFFERENCECURVESARERELATIVELYATHERE,IMPLYINGTHATTHESEINDIVIDUALSAREQUITEWILLINGTOSUBSTITUTEONEGOODFORANOTHERTHISEXIBILITYIMPLIESARELATIVELYNARROWRANGEOFMUTUALLYBENECIALTRADINGOPPORTUNITIESATPOINTAWITHLESSEXIBLEPREFERENCES,THENUMBEROFOPPORTUNITIESISINCREASEDBECAUSETHEINDIVIDUALSMAYSTARTTRADINGFROMWIDELYDIFFERINGMARGINALRATESOFSUBSTITUTIONCHAPTER18181THEINCREASEINXEDCOSTSWOULDNOTALTERTHEOUTPUTDECISIONSBECAUSEITWOULDNOTAFFECTMARGINALCOSTSITWOULD,HOWEVER,RAISEACBY5ANDREDUCEPROTSTO12,500WITHTHENEWTCFUNCTION,MCWOULDRISETO15QINTHISCASE,QH11005400,PH1100580,TCH1100522,000,ANDH9266H1100510,000182WITHEH11005H1100215,THERATIOOFMONOPOLYTOCOMPETITIVECONSUMERSURPLUSIS058EQUATION1818PROTSREPRESENT19PERCENTOFCOMPETITIVECONSUMERSURPLUSEQUATION1820183IFQH110050,PH11005100TOTALPROTSAREGIVENBYTHETRIANGULARAREABETWEENTHEDEMANDCURVEANDTHEMCCURVE,LESSXEDCOSTSTHISAREAIS5100666H1100533,333SOH9266H1100533,333H1100210,000H1100523,333184YES,OUTPUTISTHESAMEBECAUSEMARGINALREVENUECURVESARELINEARTOOBECAUSEOUTPUTDOESNOTEXPANDUNDERTHETWOPRICEPOLICY,WELFARECANNOTBEINCREASEDBYSUCHAPOLICY185PROTSWOULDBEMAXIMIZEDBYSETTINGMARGINALPRICEEQUALTOMCINEACHMARKETANDCHARGINGANENTRYFEEOF36INMARKET2AND162INMARKET1CHAPTER19191WITHQ2H1100540,THERESIDUALDEMANDFACINGRM1ISQ1H1100580H11002PHENCE,MRH1100580H110022Q1SOFORQ1H1102240,MRH110210CLEARLY,ITISMARGINALREVENUE,NOTPRICE,THATMATTERSFORTHECHISELINGDECISION192INEXAMPLE191,Q2WASASSUMEDTOBECONSTANTNOWRM2ISASSUMEDTORESPONDTORM1SINCREASEINOUTPUTBYREDUCINGITSOWNOUTPUT193CONSTANTMARGINALCOSTSWOULDNOTCHANGETHENATUREOFTHEPROBLEMINCREASINGMARGINALCOSTWOULDDRIVETHERMSTOWARDMOREEQUALSHARESOFTHEMARKETPLACETHANRESULTFROMTHESTRATEGICINTERACTIONSINTHECONSTANTCOSTCASE194EFCIENCYREQUIRESPH11005MCH11005ACUNLESSTHEDIFFERENTIATEDGOODSEXHIBITLITTLESUBSTITUTABILITY195CONSUMERSURPLUSISASLARGEASPOSSIBLEGIVENTHENOSUBSIDYCONSTRAINTMARGINALCOSTPRICINGPH11005100WOULDINCREASECONSUMERSURPLUSBUTWOULDREQUIREASUBSIDYTOCOVERXEDCOSTSOF8,000CHAPTER20201THEHIGHERISH9254,THEGREATERTHEPRESENTVALUEOFTHEFUTURESHAREOFMONOPOLYPROTSHENCE,HIGHERDISCOUNTRATESFAVORTACITCOLLUSIONWITHH9254H110058,ATMOSTVERMSWILLSUPPORTACOLLUSIVEAGREEMENTWITHRH1100510,UPTO10RMSWILLCOLLUDETACITLY202REPEATEDFOLLOWERFOLLOWERSTRATEGIESMIGHTBEENFORCEDBYRETALIATIONWHENEVERONERMCHOOSESLEADERBRIEFANSWERSTOQUERIES715203IFADOESNOTHAVETHEADVANTAGEOFMOVINGRST,THESITUATIONOFBOTHRMSISSYMMETRICAL,ANDTHEMODELRETURNSTOTHESTACKELBERGCASETHEANALYSISHEREDIFFERSFROMCONTESTABILITYBECAUSEOFTHESUNKCOSTASSUMPTION204LINEARDEMANDANDMARGINALCOSTSRESULTINQABEINGALINEARFUNCTIONOFQBHANDQBL,WHICHINTURNARELINEARFUNCTIONSOFBSMARGINALCOSTWITHNONLINEARDEMANDOR,MOREIMPORTANTLY,MARGINALCOSTS,QAWOULDNOTBEBASEDONEMCB205YES,ARESERVATIONPRICEWOULDCHANGEBIDDINGSTRATEGIESTORAISEBIDSSOLONGASRRESERVATIONPRICEH11021VA,VBCHAPTER21211HIRINGRISESTOLH1100536BECAUSETHEMARGINALREVENUEPRODUCTFUNCTIONHASSHIFTEDOUTWARD212INTHISSHORTRUNPROBLEM,FISHELDCONSTANTINCREASESINTHEVARIABLEINPUTSLANDKENCOUNTERSHARPLYDIMINISHINGMARGINALPRODUCTIVITIES213USINGEQUATION2143ANDTHEFACTSTHATSLH11005H9252ANDH9268H110051YIELDSEL,WH11005H110021H11001H9252EQ,PH110011214NOWMRPH1100530PERHOURINTHISCASE,THEMONOPSONYWILLHIRE750WORKERS,ANDWAGESWILLBE15PERHOURASBEFORE,THEWAGEREMAINSATONLYHALFTHEMRPCHAPTER22221HEREFULLINCOMEISWH11001NSPENDINGHALFOFTHISONLEISUREWOULDREQUIREHH110051/2H11001N/2WBECAUSELEISURE“COSTS”WPERHOURHENCE,LH110051H11002HH110051/2H11002N/2WASWASCALCULATEDDIRECTLY222WITHAATNOF2,EQUATION2222SHOWSLH110053/10ASSUMEWH1100510SUBSTITUTINGTHENEWFORMULAFORNINTOEQUATION2220ANDSOLVINGFORANOPTIMUMYIELDSLH110051/10,NH110057/2INSTITUTIONOFANIMPLICITTAXONEARNINGSREDUCESLABORSUPPLY223THEMONOPSONISTWANTSTOBEONITSDEMANDFORLABORCURVETHEUNIONPRESUMABLYWANTSTOBEONTHELABORSUPPLYCURVEOFITSMEMBERSONLYTHESUPPLYDEMANDEQUILIBRIUMLH11005583,WH110051167S