Suppose market demand is p = 10 - Q. Firms incur no cost of production. If firm A is the incumbent, can it deter the entry of its rival, firm B?
What will be an ideal response?
Firm B's reaction function is qB = 5 - (1/2 )qA. Knowing this, firm A's profit function is ? = 5qA - q2A/2. The Stackelberg leader maximizes profit at a quantity of 5 and firm B will produce 2.5. Firm A's profit is 12.5. If firm A produces more, firm B will still enter and earn a profit. Firm B must earn a profit since it faces no costs. Firm A's profit falls as its output increases. So firm A cannot deter entry and is better off accommodating firm B.
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a. 1 Swiss franc = $1.16. b. 1 Swiss franc = $0.16. c. 1 Swiss franc = $0.84. d. $1 = 1.16 Swiss franc. e. $1 = 1.84 Swiss franc.
A violinist will take no less than $40,000 a year touring with the Seattle Symphony Orchestra. Otherwise she would prefer to work as a music teacher in Seattle. The Orchestra actually pays her $75,000 . The rent component of her orchestra wage is
a. $40,000 b. $75,000 c. $115,000 d. $35,000 e. $0
Taxation is an important cash flow issue, but it typically does not have a strong impact on the choice of organizational form (such as branch or subsidiary) or the location of an investment.
a. true b. false
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A. contractionary fiscal policy and expansionary monetary policy tend to be ineffective against balance of payment constraints. B. contractionary fiscal and monetary policies are always undesirable for any developing country. C. it employs economists that know little about developing countries and their economic affairs. D. the conditions tend to be procyclical, therefore worsening the recessions.