Demand for hot dogs on Main Street in Small town is:Q = 100 -20P

Assume that there are fixed costs of $1200 and that MC = $1.00. The purpose of this problem is to examine duopoly equilibria in this market (different behavioral assumptions lead to different equilibria) and to compare these equilibria to both the competitive and monopoly equilibria as well as to each other.

Graph the Demand and MR.

Indicate the competitive price and quantity with P* and Q*.

Indicate the monopoly price and quantity with Pm and Qm.

The town grants vending rights to Doug's Dogs and Frank's Franks, at no charge. Other vendors are excluded. Assume for now that both Doug and Frank are Cournot Duopolists---they take each other's production as fixed and adjust their own to maximize their profits. Let qD represent Doug's production and qF represent Frank's: Q = qD + qF.

Write Doug's profits as a function of qD and qF . [Hint:as a first step, invert the demand function and replace Q with qD + qF.] D = (1)

Suppose that Doug's knows qF. If he assumes that this will not change once Frank knows qD , What value of qD should Doug Choose to maximize his profits as a function of qF? This is Doug's "reaction function". Draw it one the diagram. qD = (2)

Now, find Frank's reaction function and add it to the diagram. qF = (3)

Suppose that Doug had been producing at the monopoly solution before Frank arrived on the scene. Indicate his output level on the reaction function graph. What output would Frank initially choose to sell? Frank's Output to sell = (4)

Explain why this would not be an equilibrium, and describe what would happen.

Draw the path that output would follow toward the new equilibrium on the reaction function diagram. What would equilibrium P, qD,qF and Q be? P = (6), qD = (7), qF = (8),Q= (9), Doug's profits are D = (10), Frank's profits are F = (11), Their combined profits are = (12). Plot P and Q on the graph in a and label them Pc and Qc (C for Cournot) (13)

Stackelberg Model, Leader Follower.

Explain why the behavior of both Frank and Doug in b is naive.

Assume that Frank continues to behave naively, but that Doug figures out that Frank is reacting to his decisions. Specifically, Dough Knows that Frank's choice of qF is a function of his own choice of qD, as you found in b (Frank's reaction function). Dough takes this into account by substituting Frank's reaction function into his own profit equation, to get: D = (2)

Find Doug's new profit-maximizing choice of qD. qD =(3), Frank will choose qF = (4), Total Quantity produced is q = (5), The price is P = (6), Doug's profits are D = (7), Frank's profits are F = (8), Their combined profits are = (9). Plot the new Q and P on the graph in a, labelling them PLF and QLF (LF for Leader-Follower) Also, plot the point (qD, qF) on the reaction function diagram in b and label it LF.

Leader-Leader model: aka Bertrand Model. In c it was assumed that Frank continued to be naive. Suppose instead that he figures out Doug's behavior at the same time that Doug figures out his own. That is, they both simultaneously decide to lead, mistakenly thinking the other will follow.

This choice of output level will then be qF = (1) [Hint: does his problem differ in any way from Doug's in c?] qF = (1), Total output will be Q = (2), And the price will be P = (3), Doug's profits are D = (4), Frank's profits are F = (5), Their combined profits are = (6). Plot the new Q and P on the graph in a and label them QLL and PLL. Also, plot the point (qD, qF)on the reaction function diagram in b and label it LL. Finally, what do you speculate will happen once they both realize that the other is not following? (7)

1 Flag question Improving the level of education of the labor force will: Select one: O a. make the production possibilities curve lincar. O b. shift the production possibilities curve inward. O C. move the economy from a point on the production possibilities curve to a point inside the production possibilities curve. O d. shift the production possibilities curve outward, O e. move the economy from a point inside the production possibilities curve to a point on the production possibilities curve.20'. Image C and Image D are examples ofproduotionpossibih'ty 'ontiers we used to demonstrate different trade theories. From these images, we eventually derived the curves for the international markets. Choose the best answer below. 0 3} Image C was used to build export supply curves and import demand curves that appear horizontal in some portion 0 b} Image D was used to build export supply elm-es and import demand waves that appear \"smooth and continuous." O C} Image C was used to build export supply curves and import demand cones that appear \"smooth and continuous.\" 0 d] Image D was used to build import supply:T curves and export demand waves that appear horizontal in some portion Production Possibility, scarcity, trade-offs and opportunity cost questions: CLOI 1. Use the below table to answer the following questions. (10 Marks) Production Alternative Types of Production Bulter 10 12 14 16 Guns 30 20 a. Draw a production possibilities curve for butter and guns using the data above.Question 4 (20 Marks) Shitapa Ltd keeps separate books for its cost and financial records. The net income shown in the cost accounts was N$20 496. Net income recorded in the cost accounts was more than the net income for accounting profit by N$1 904. A comparison of the two sets of accounts revealed the following: Inventory valuations Cost Accounts Financial accounts Raw materials: N$ N$ Opening inventory 6 821 7 259 Closing inventory 5 483 5 128 Finished goods: N$ N$ Opening inventory 14 491 14 105 Closing inventory 12 130 11 831 The following transactions were not recorded in the cost accounts: Dividends and interest received N$552 Loss on sales of milling machine Required: A. Reconcile the net income figures as shown in the two sets of accounts. (11 Marks) B. Explain the difference between integrated accounting system and interlocking accounting system. (9 Marks)Question Four From the following information, prepare both the Sales Ledger Control Account and the Purchases Ledger Control Account in order to locate where the error (s) may have occurred in the books of XYZ, whose trial balance did not balance. K 1st February 2002: Sales ledger balances 56 454 Purchases ledger balances 38 840 Details for the month: Discount allowed 8 204 Discount received 3 442 Cash and cheques received from customers 574 634 Returns outwards journal 2 904 Returns inwards journal 7 236 Sales Day Book 611 648 Purchases Day Book 420 832 Cheques paid to suppliers 410 838 Suppliers were paid through petty cash 124 Balances on the Sales Ledger set off against balances in the Purchases Ledger 1 280 On 28th February 2002, the list of balances from the Sales Ledger shows a total amount of K76 748 and that from the Purchases Ledger a total of K40 420