When the opportunity cost of running a competitive firm increases, the welfare of the
firm's owner decreases.
If x = f (K,L) is a constant returns to scale production function, then the marginal
and average products of both K and L depend only on the ratio of the two inputs
( K / L ), not the absolute values of K and L.
A poor man consumes 5 units of chicken a month; his expenditure on all other things is
denoted as y. Recently the price of chicken has risen from p = NT$100 to
p = NT$120 . To help him weather through this difficult time, one of his neighbors
promises to give him extra NT$100 a month. Then the poor man will be exactly as well
off as before the price increase.
Generally speaking, the market demand of a commodity depends on income
distribution among the consumers of this commodity. However, if all the consumers
have identical preferences and their income consumption curve is a straight line from
the origin, then the market demand is independent of income distribution among them.
In figure 2, point A on SRMC curve is the minimum point of an average variable cost
(AVC) curve while point B on LRMC is the minimum point of the long run average
cost (LRAC) curve. Then, the area F represents the firm's fixed cost in the short run.
(10 分)
In a duopoly market, two firms produce homogeneous product. Both firms
have identical constant marginal and average costs which is equal to $20. The
market demand curve is given by
x = 100 − 2p
where x is the quantity demanded and p is the price of the product.
If the output is the decision for both firms, find the Nash equilibrium for the model.
(explain your answer, otherwise no credit will be given.)
In a duopoly market, two firms produce homogeneous product. Both firms
have identical constant marginal and average costs which is equal to $20. The
market demand curve is given by
x = 100 − 2p
where x is the quantity demanded and p is the price of the product.
If the price is the decision for both firms, find the Nash equilibrium for the model.
(explain your answer, otherwise no credit will be given.)
In a duopoly market, two firms produce homogeneous product. Both firms
have identical constant marginal and average costs which is equal to $20. The
market demand curve is given by
x = 100 − 2p
where x is the quantity demanded and p is the price of the product.
Perform the normative analysis for the models in parts a and b.
Find the general competitive equilibrium price for input and outputs. Also find the
equilibrium levels of consumption for both consumers.
Fine the Pareto efficient allocations for outputs.
Using the results in parts a and b to verify the first fundamental theorem of welfare
economics.
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