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Week 11

Week 11. Managerial Economics. Order of Business. Homework Assigned Lectures Other Material Lectures for Next Week. Homework-This Week. Problem 1.

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Week 11

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  1. Week 11 Managerial Economics

  2. Order of Business • Homework • Assigned Lectures • Other Material • Lectures for Next Week

  3. Homework-This Week

  4. 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?

  5. 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.

  6. 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.

  7. Pashigian, Chapter 9, Exercise 5

  8. Pashigian, Chapter 9, Exercise 6

  9. Pashigian, Chapter 9, Exercise 9

  10. Pashigian, Chapter 9, Exercise 11

  11. Lectures for This Week • Cartels • Duopoly • The Cournot Model • A Second Cournot Example • Extending the Cournot Model • The Bertrand Model • Nash Equilibrium

  12. Cartels

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

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

  15. Duopoly

  16. The Cournot Model

  17. A Second Cournot Example

  18. Extending the Cournot Model

  19. The Bertrand Model

  20. Nash Equilibrium

  21. Demand for PC’s

  22. Requires: Intel Chip Microsoft Windows

  23. Requires: Intel Chip Microsoft Windows Macintosh Linux AMD

  24. P* P*/2 MR

  25. P* I MSFT

  26. P* I MSFT

  27. P* I MSFT

  28. P* I MSFT

  29. P* I MSFT

  30. P* I MSFT

  31. Each sets the price at a third of the maximum price. The combined price is 2/3 of the max price. P* I MSFT

  32. MCMSFT = 0 MCINTL >0. P* I MSFT

  33. Lectures for Next Week • Agency Problems • Expense Preference

  34. Agency Problems

  35. Expense Preference

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