suppose richie rich\'s uncle gives him $100,000 in period 1 (today), $200,000 in
ID: 1210187 • Letter: S
Question
suppose richie rich's uncle gives him $100,000 in period 1 (today), $200,000 in period 2 and $50,000 in period 3. given an interest rate of 1%( ei. r=0.01 ), the present value of this stream of payoffs is closest in value to.
a.100,000 b.102,000 c.318,000 d.350,000
adopting a " meet the competition" clause makes it more difficult to sustain cooperation, since the incentive for a firm to secretly cut its price (below an agreed upon price) increases
true or false
the sylos postulate assumes the market price will remain the same whether or not entry occurs in the market.
true or false
consider a market with 2 firms: A&B. firm a's marginal cost is MCa=200+qa, while firm b's marginal cost is MCb=200+2qb. striking up a cartel agreement, these firms collectively decide to produce 600 units (ei. 600=qa+qb). wishing to maximize their joint (cartel) profit, quotas should be set such that A produces _______ units and B produces ______ units.
a. 300;300
b.100;500
c. 400;200
d.500;100
Explanation / Answer
(1) (d)
Present value ($) = 100,000 + [200,000 / 1.01] + [50,000 / (1.01)2] = 100,000 + 198,020 + (50,000 / 1.0201)
= 298,020 + 49,015 = 347,035
(2) True
(3) False
Sylos postulate states that an incumbent will retain its quantity unchanged before or after entering a new market.
Note: First 3 questions are answered.
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