Problem 1

The Mojo company produces goods with a cost function () = 10 + 4. Meanwhile, market demand is formed on the demand function = 50 - 0.5; where is the amount of demand in the market and is the price level.

a. If the Mojo company is the only company in the market, calculate the profit of the Mojo company in the short term.

b. In the long run, it turns out that many companies enter the market. Explain using graphical illustrations, what happens to the demand curve, the price set, and the amount of profit of the Mojo company after the company's entry.

c. It is assumed that in the end there are only two companies that have survived in the market, the Mojo Company and its competitors. Both companies face the same market demand and have the same cost function. If they compete according to the Duopoly Cournot Model, determine the reaction function of each company, then calculate their optimal output in the market (or 1 and 2, where 1 and 2 are the outputs of Mojo Company and its competitors). .

Problem 2

A monopolist that produces water for water has a constant marginal cost of $20,000. Based on the results of the study conducted, it is known that the elasticity of the auspicious water demand for prices (in absolute value) is 2.

a. With a fixed cost of the company (fixed cost), = 0, maximum profit is generated when the company produces 10 million m3 of watering power. Calculate the profit the company makes.

b. The government feels that the price set by the company is too high. Therefore, the government then set a maximum price of water for water to be $10,000 per m3

• Draw in the diagram the effect of these government regulations on company production decisions. Do you think government policy is effective? explain.
• What is the maximum price that must be set if the government wants to eliminate inefficiencies in the market?

c. The company knows that it turns out that in the market there are two types of consumers of the water supply (call it high and low type), with the inverse demand function as follows:

High type: H = 53,000 - 0.003H

Low type: L = 110,000 - 0.01L

If the company can discriminate prices, what is the price and amount of water to sell for each type of consumer?