Answer Happy

Q32
A monopolist has the following production function Q = L0.5K0.5 where L is the number of units of labour and K is the number of units of capital used in the production process. Suppose that the cost per unit of labour is $3 and the cost per unit of capital is $27 and the monopolist takes the input prices as given. Assume the market demand is P = 24 - Q. If the monopolist is going to maximise the profit, how much output will they produce? How many units of labour and capital is the firm going to employ? How much profit is the firm going to earn?
Suppose that two firms produce mountain spring water and the market demand for mountain spring water is given as follows: P=254-91-92 Firm 1 and Firm 2 have a MC = 50 a) Find the Cournot-Nash equilibrium price and quantity of each firm. (3 marks) b) Assume now that firm 1 becomes the Stackelberg leader. What will be the market price, output by each firm? Compared to part a, who gains? (3 marks) c) If Firm 1 chooses a quantity, then Firm 2 chooses a quantity (having observed Firm 1's quantity), then Firm 1 has an opportunity to revise its quantity (having observed Firm 2's quantity), then payoffs are determined, does either firm stand to gain relative to the case of simultaneous quantity choice? Why or why not? (hint: there is no need to do any calculation here). (2 marks)