Suppose the following:
I. Two countries each with demand for homogeneous goods given by P()=40−
II. In country A there is one firm with marginal cost of production of .
III. In country B there is one firm with marginal cost of production of .
IV. Competition in relevant markets is Cournot
a) Find for each country expressions for the equilibrium price and equilibrium quantity and firm profits under the assumption that no occurred between the two countries occurred. b) Now assume a state of free trade occurs between the two countries. Derive expressions for each firm’s quantity supplied and country A’s imports.
c) Assuming that =10 and =8. Which Country stands to benefit by imposing k2 per unit tariff on imports? By how much would total surplus increase? Who gains and who Loses and by how much?
Given the constant elasticity demand function as : P=P ℎ ℎ cy o m
a. Show that Marginal Revenue of this function is proportional to the price (let K=(1)1⁄ ). To simplify the equation.
b. calculate the Marginal Revenue when P==−2 and when b=-10.
c. what does your answer mean in terms of revenue facing the firm?
d. If =− what would this imply for Marginal Revenue and Total Revenue of the firm.
e. Explain how Marginal Revenue and profit maximization would be affected if demand was inelastic.
A consumer is faced with a utility function
(x,y)=4x2+3xy+y2 And his budget constraint is given by ln( xy)=5
. a) Find the optimal values of x and y
b) Find the value of the shadow price
c) Interpret the value of lambda. Does it make economic sense?
d) Other than completeness, monotonicity and transitivity, discuss the other three axioms of consumer preferences.
e) Using practical examples discuss the duality principle as it relates to both the firm and households.
The Zambian Macro-economic environment has been improving recently with the inflation rate below 10% while the kwacha has also been appreciating against the US dollar. As a manager of a well-known commercial Bank in Zambia (Bank WXYZ) provide an elaborate explanation of how the Macro-economic environment affect the firm. Your explanation should not exceed a page.