Solved Assignments In Figure 9-3, supply before NetJets is Q S = -20 + 3P and demand is Q D = 20 – P. a. Show that…


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In Figure 9-3, supply before NetJets is QS = −20 + 3P and demand is QD = 20 − P. a. Show that equilibrium is at $10 and 10 units. Assume that time-sharing cuts marginal costs by $2 and raises demand by $6 at all outputs. Show that the new equilibrium is at $10 and 16 units. Then calculate producer and consumer surplus before and after NetJets introduces its contract. b. [Requires calculus] Now assume that NetJets is a monopoly. Before it introduced its contract the marginal cost was MC = 6.67 + Q/3 (fixed costs are absent) and demand was QD = 20 − P. Calculate its profit-maximizing output and price. Then show the new equilibrium after the contract shifts marginal cost downward by $2 and demand upward by $6. Why does price increase here but not in the competitive market? c. [Requires calculus] Try analyzing this situation when NetJets and Brand X both offer time-shares and behave as Cournot-Nash duopolists. Market demand is again QD = 20 − P, and marginal costs of both sellers are constant at $8. Compare this solution (and consumer and producer benefits) with the outcome when demand shifts upward by 8.00 and marginal cost falls to $6.Figure 9-3

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