Week 11

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Week 11

• Managerial Economics

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Order of Business

• Homework
• Assigned Lectures
• Other Material
• Lectures for Next Week

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Homework-This Week
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Problem 1

• A monopolist has a demand function and a cost
  function given by the following table. How many
  should he produce? And what price should he sell
  it? And what will be his profits?

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Problem 2

• Q 420 - 10 P
• There is one and only one way of producing
  widgets. The cost varies with the number produced
  at each plant.

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Problem 2

• Assume initially that, by law, a firm is limited
  to operating one and only one plant.
• What level of output minimizes average cost?
  Explain your answer.
• Assuming that the industry is competitive, what
  will be the price of widgets?
• c. How many will be sold?
• d. How many plants/firms will produce widgets?
• e. Now assume that a firm is allowed a monopoly
  in the production of widgets. What price will it
  charge?

• Q 420 - 10 P
• There is one and only one way of producing
  widgets. The cost varies with the number produced
  at each plant.

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Pashigian, Chapter 9, Exercise 5
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Pashigian, Chapter 9, Exercise 6
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Pashigian, Chapter 9, Exercise 9
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Pashigian, Chapter 9, Exercise 11
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Lectures for This Week

• Cartels
• Duopoly
• The Cournot Model
• A Second Cournot Example
• Extending the Cournot Model
• The Bertrand Model
• Nash Equilibrium

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• Cartels

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• Carnegie Watched the Costs and let the profits
  take care of themselves.

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• Form a Pool!
• And of course, they constantly broke down!

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• Duopoly

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• The Cournot Model

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• A Second Cournot Example

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• Extending the Cournot Model

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• The Bertrand Model

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• Nash Equilibrium

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Demand for PCs
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Requires Intel Chip Microsoft Windows
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Requires Intel Chip Microsoft Windows
Macintosh Linux
AMD
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P
P/2
MR
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Each sets the price at a third of the maximum
price. The combined price is 2/3 of the max
price.
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MCMSFT 0 MCINTL gt0.
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Lectures for Next Week

• Agency Problems
• Expense Preference

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• Agency Problems

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• Expense Preference