3 24 points In Bricktown district in Oklahoma City, every building must be faced with brick. It requires one ton of bricks to cover the face of a building in Bricktown. That is, every building owner will only buy one ton of bricks. The main street of the district is 35 miles long with 350 buildings of the same size evenly distributed along the street. There are two brickyards in town. One is located a distance of 1 miles from the west end of the street (point 0 in the figure below), while the other is located 31 miles from the west end of the street (and thus 4 miles from the east end of the street). A map of the street is given below. To obtain one ton of bricks, a building owner of Bricktown buy the bricks from one of the yards and pay a trucking service to deliver them. All the trucking services charge $5 per mile to transport a ton of bricks. Let P1 be the price per ton charged by Brickyard 1 (BY1) and P2 the price per ton charged by Brickyard 2 (BY2). It costs Brickyards 1 and 2 the same amount, $50, to produce a ton of bricks. Each building owner is willing to pay up to $1000 for one ton of bricks. Merger image-6.png (Hint: The marginal consumer is the one who is indifferent between buying from either brickyard. You can define Xmas the distance between the marginal consumer and BY1. In that case, BY1 will serve everyone over (1 + Xm) miles. This is how we solved the question in the classroom. You can also define Xm as the distance between the marginal consumer and point O. In that case, BY1 will serve everyone over Xm miles. Please also note that there are 350 buildings over 35 miles. That is, there are 10 buildings over one mile on average.) A. Compute the Nash equilibrium prices, the number of people buying from each brickyard, and the profit of each firm. The Nash equilibrium prices are p1 = $ type your answer... and p2 = $ type your answer... There are type your answer.. people buying bricks from BY1 and type your answer... people buying from BY2. The profit of BY1 is $ type your answer.. and the profit of BY2 is $ type your answer... B. What is the (equilibrium) location of the marginal consumer, i.e., his building's distance from point 0? How much does he pay in total to buy his bricks? The marginal consumer is located at mile type your answer... and his total payment is $ type your answer.. Submit Macbook ProX Cammiot Upeflew Labs, windows, of applications qui mg the CAdin. 1 45 points 1) Assume that two firms compete in an industry, both with constant marginal cost and average cost of $20. The market inverse demand curve is estimated as P = 620 - Q where the market output Q is the sum of all firms' individual outputs, i.e., Q = q1 + 92. A. Suppose that firm 2's CEO is somewhat hesitant and waits to see how much firm 1 will produce before deciding on its own output level. That is, firm 1 is a Stackelberg leader and firm 2 is a Stackelberg follower. Let qL denote the leader's output and qF the follower's output. Compute each firm's output level, the market price, and each firm's profit. The leader produces type your answer... units and the follower produces type your answer... units. The market price is $ type your answer. The leader's profit is $ type your answer... and the follower's profit is $ type your answer... B. Now suppose that the shareholders of the follower firm (firm 2) become discontented with the firm's profits, and replace the CEO with a more aggressive person. This person does not stand idly by while firm 1 makes its decisions. Instead, the two firms now choose their output simultaneously. However, the new CEO requests to be paid 10% of the profit increase if any. Compute each firm's output level, the market price, and each firm's profit. How much will firm 2 pay to the new CEO? Firm 1 produces type your answer.. units and firm 2 produces type your answer... units. The market price is $ type your answer. . Firm 1's profit is $ type your answer... and Firm 2's profit is $ type your answer... . The new CEO is paid $ type your answer.. C. Now suppose that the CEOs of firms 1 and 2 meet one year at the Swan Ball and have an opportunity to chat about the competitive conditions in their industry. They decide that because they will interact indefinitely in the market they should not behave so aggressively toward one another, instead, they should cooperate and agree that each of them should produce one-half of the monopoly output. The next morning, each CEO gets up and contemplates whether he or she should fulfill the agreement. Let r be the interest rate. Compute the present discounted value of the profit obtained by cooperating and the present discounted value of the profit of the cheater while the other firm sticks with the agreement (given that the firms earn Cournot profit thereafter if any firm cheats). The present discounted value of the profit obtained by cooperating over the indefinite future is choose your answer.. The present discounted value of the profit of the cheater while the other firm sticks with the agreement is choose your answer... D. For what values of r is the agreement self-sustaining (that is, no firm ever cheats from the collusive agreement)? If the interest rate r is choose your answer... than type your answer.. , then the agreement is self-sustaining (round up to two decimal places). 2 39 points