## Solution Library

#### Merger and acquisition of firms operating under Cournot competition

Question: Suppose firm 1 and firm 2 merge. Call the new firm A. It has output xA and profit πA. Suppose there is Cournot competition after the merger. For now, we assume that the marginal cost of Firm A, the merged firm, still is 40  e) Compute quantities for both the merged firm and firm ... Read More

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#### essay on Market imperfection associated with negative externalities

Question: This assignment in Economics, deals with macro-economics. An essay on Market imperfection associated with negative externalities. According to Economics, perfect markets would require an “invisible hand” to allocate all the resources to be at the right place and at the ... Read More

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#### Application of Nash Equilibrium and Game Theory with examples

Question: Cineplex and AMC are two rival movie theatre chains. They must each decide whether to set an admission price of \$10 or set an admission price of \$12; of course, the number of movie goers (and thus their revenues) will depend both on the price they set as well as the price charged by their ... Read More

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#### Practical problems in Price Theory

Problem 1: Luke likes to consumer CDs (good1) and pizzas (good 2). His preference over both goods is given by the utility function   U(x1; x2) = x21x42.   If Luke allocates \$200 to spend on both goods and if a case of CDs costs \$20 and a pizzacosts \$10, how many cases of CDs and pizza ... Read More

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#### Problem on utility function

Consider Garfield’s utility function given as U(x1, x2) = x1x2, where x1is lasagna and x2 is "everything else". Suppose his allowance from Jon is m = \$8and p1= \$1 and p2= \$1   (i) Find Garfield’s optimal choice of lasagna and everything else and illustrate your answer g ... Read More

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#### Marginal utility, indifference curve, demand curve

Question: Nancy is taking a course in Fairy Tales from Professor Grimm and another in Philosophy from Professor Par. In each course there will be two exams, a midterm exam and a final exam. In Professor Grimm’s course, Nancy’s grade will be determined by the minimum of her scores on the ... Read More

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#### Budget Line and Indifference Curves Problem

Question: Monica has been considering buying a mountain bike. Last month Monica had an income of \$30,000. The bike’s price was \$1000, the composite good price was \$1, and she decided not to buy the bike.  This month Monica was surprised to get a \$10,000 increase in income. The prices of ... Read More

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#### Problem on Marginal utility

Question: Max has a utility function U =√ x1x2 where x1 is litres of ice-cream and x2 is boxes of strawberries. The marginal utility of a litre if ice-cream is MU1 =0.5 √x2/ x1 and the marginal utility of a box of strawberries is MU2 =0.5 √x1 /x2. The prices of x1 and x2 are both ... Read More

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#### Problem on Marginal utility

Question: Ambrose consumes two goods, peanuts (x1 ) and a composite good (x2). He has a utility function U = 4 √x1 + x2. This means his MU1 = 2/ √x1 and his MU2 = 1 . The current prices are p1 = 0.5 per kilogram and. p2 = 1. His budget is \$20 per month. (a) Write down Ambrose&rsqu ... Read More

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#### Marginal utility and demand

Question: a) Johnny consumes peanuts (x1) and a composite good (x2). His utility function is U = x1x2. His marginal utilities are MU1 = x2 and MU2 = x1. Johnny’s budget is \$20 and the price of the composite good is \$1. Derive Johnny’s demand function for peanuts. b) Ambrose consumes pe ... Read More

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#### Utility Function - Problem

Question: In Vancouver the Salvation Army encourages people to make food voucher donations to panhandlers instead of simply giving them cash. You can buy a food voucher for \$5 and give it to a panhandler who can use it to purchase food. The Salvation Army says it’s a way to ensure tha ... Read More