Compute the following microeconomic equations. If any clarifications are needed please leave a comment.
The inverse demand function for deveioped land in the city of Kingston is p = 103 {3.502}' where Q is the quantity {measured in acres) and p is the price per acre. (i) Assume for the moment that rm A has the exclusive right to develop land in the city of Kingston. Then rm A is the monopolist in this market, and thus Q = 93 where in denotes the number of aura developed by rm A. Find rm As output level that would maximize its prot, ifrm A's marginal cost is RICA = 10. Denote this output level by ( (where the superscript 111 indicates that this is the monopoly solution). Compute the monopoly's prot, and denote it by .- [ii] Now assume that the mayor of Kingston allows two rms, rm A and rm 3, to develop land in Kingston. Assume that thetwo rms compete as Cournot rivals: the rms set their quantities q; and gig, and the resuiting market price is p = 100 - 0.5:\" 0.593. Suppose that the mayor requires that the two rms choose their output levels simultaneously. Assume that the marginal cost ofrm B is 5403 = 10 = RICA. Find each rm's best response curve. Find their NashCournot equilibrium outputs, and denote th- by of" and eg. Find the NashCournot equilibrium price [denoted by p0). and nd the prot of each rm at the NashGourmet equilibrium (denoted by 173 and 3)- {iii} Now, suppose that the mayor changes her mind: she allows rm A to set its in rst [and to announce its output decision} and requires rm A to make a full commitment to carrying out its announced output decision, before rm 3 is allowed to make its choice of .33 {having full knowledge of (34 by then). Firm A? being the rst mover, is called the Stackelberg leader. Find the output of the Stackelberg leader, and denote it by giL (where the superscript 3L indicates Stadcelberg leader). Find the follower-'5 output (denoting it by q; where F stands for "'follower\"), the industry output, and the market price under the NashStackeiber niiibriumr Find the Staclnelberg leader's prot, irk and the foilower's prot, w (iv) Compare QT (found in part (i) above) and (13" (found in part (iii) alxwe]. Is it true that q' = (If? If it is true? can you tell whether this result is accidental or whether there is some plausibte expianation behind it? Explain your answe {v} Now suppose that the mayor allows rm A to be the Stachelberg leader only if rm A pays the mayor a bribe. 1What is the maximum bribe that rm A woldd be willing to pat? mm 3,... am