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1. (04.02, 04.03, 05.02, 05.03, 06.04 HC) Company Gamma is a prafltmaximizing monopolist currently earning positive economic prot. a. Draw a correctly labeled graph for
1. (04.02, 04.03, 05.02, 05.03, 06.04 HC) Company Gamma is a prafltmaximizing monopolist currently earning positive economic prot. a. Draw a correctly labeled graph for Company Gamma. Label the axes and: i. Prot-maximizing price (PE) ii. Prot-maximizing quantity (OE) iii. Socially optimal price (Pso) b. Is this rm allocatively efcient? Explain. o. Shade the area of the firm's prot. d. Assume this monopolist became able to perfectly price discriminate. Identify if the following would increase. decrease, or remain constant: i. The rrn's protmaximizing quantity of output ii. The rrn's prot e. Company Gamma hires in a perfectly competitive labor market. Draw a correctly labeled labor market graph, labeling the axes, equilibrium wage (We), and equilibrium quantity of labor employed (QE). 1'. The government makes a licensing exam no longer required for the labor that Company Gamma uses. Illustrate the effect of this change only on the graph from part (2). 9. Will the equilibrium wage rate for labor increase. decrease. or stay the same? 2. (03.07 HC) Company Kai operates in a perfectly competitive, constant-cost industry and is earning positive economic profit. a. Draw correctly labeled side-by-side graphs for the market and for Company Kai. Label the axes and: i. the market price (PE) and market quantity (QF) ii. the firm's quantity of output (QF) iii. the firm's average total cost (ATC) iv. completely shade the area of the firm's total revenue b. What will happen to the market price and Company Kai's profits in the long run? Explain.3. (04.05 HC) Company X and Company Y are the only sellers of a good with no close substitutes. They are each considering whether to open a new store. They project the following daily prot payoff scenarios: Company V New Store No New Store Company x New Store $16,316 $25,310 No New Store $10, $25 $22, $22 a. Does Company X have a dominant strategy to open a new store. not open a new store, or no dominant strategy? b. Does Company Y have a dominant strategy to open a new store, not open a new store. or no dominant strategy? c. Assuming no cooperation, what will the prot be for each firm? d. The cost of opening a new store increases by 35. Draw a new payoff matrix reecting the cost increase. e. Assuming no cooperation. what will the prot be for each business after the cost increase
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