MGEB11H3 Lecture 9: 2016-11-09

Consider a single firm facing inverse demand function
p=100-10q
where q is the quantity of the good produced and p is the price for the good.
The firm has a linear cost function C(q)=10q.

Suppose now two firms are facing inverse demand function
p = 100 - 10Q
where Q=q_1 + q _ 2 is the total quantity of the good produced and p is the price for the good.
Each firm has linear cost function C(q) = 10q .

Compare the monopoly price in Q1, call it p^M, to the competitive equilibrium price in Q2, call it p^CE,
What is p^M - p^CE

A learning curve shows the performance of a person as a function of time. Suppose the learning curve function is P(t) = M - Ce^-kt, where P is the performance, t is time, and M, C and k are constant. Express time as a function of performance.

Maintenance costs on a bridge are $5,000 every third year starting at the end of year 3. For analysis purposes, the bridge is assumed to have an infinite life. What is the capitalized equivalent (CE) cost of these infinite payments, assuming an annual interest rate of 9% compounded annually?