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Author Question: Suppose the market demand elasticity is constant at -2, and there are three identical firms in the ... (Read 127 times)

Medesa

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on: Jul 1, 2018
Suppose the market demand elasticity is constant at -2, and there are three identical firms in the oligopolistic market. A Cournot firm's MPL = 1.2L-0.5, then the labor demand for a Cournot firm is
 
  A) PL-0.5.
  B) 0.6PL-0.5.
  C) 0.2PL-2.
  D) PL-2.

Question 2

Suppose the demand for widgets is given by QD = 100 - 5p - pd + 2Y, where Y is average consumer income, p is the price of lemons, and pd is the price of doodads. According to this equation, widgets are an inferior good.
 
  Indicate whether the statement is true or false


cloud

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Reply #1 on: Jul 1, 2018
Answer to Question 1

A

Answer to Question 2

False . As income increases, because of the positive coefficient (+2 ) for income, demand will increase. This indicates widgets are normal.


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