Adelivery company is considering adding another vehicle to its delivery fleet; each vehicle is rented for $150 per day. assume that the additional vehicle would be capable of delivering 1500 packages per day and that each package that is delivered brings in $0.15 in revenue. also assume that adding the delivery vehicle would not affect any other costs.

instructions: round your answers to 1 decimal place.

a) what are the mrp and mrc?

mrp = $.
mrc = $.

should the firm add this delivery vehicle? yes / no.

b) now suppose that the cost of renting a vehicle doubles to $300 per day. what are the mrp and mrc?

mrp = $.
mrc = $.

should the firm add a delivery vehicle under these circumstances? yes / no.

c) next suppose that the cost of renting a vehicle falls back down to $150 per day but, due to extremely congested freeways, an additional vehicle would only be able to deliver 750 packages per day. what are the mrp and mrc in this situation?

mrp = $.
mrc = $.

would adding a vehicle under these circumstances increase the firm's profits? yes / no.

1. consider a two-firm industry. firm 1 (the incumbent) chooses a level of output qı. firm 2 (the potential entrant) observes qı and then chooses its level of output q2. the demand for the product is p 100 q, where q is the total output sold by the two firms which equals qi +q2. assume that the marginal cost of each firm is zero. a) find the subgame perfect equilibrium levels of qi and q2 keeping in mind that firm 1 chooses qi first and firm 2 observes qi and chooses its q2. find the profits of the two firms-n1 and t2- in the subgame perfect equilibrium. how do these numbers differ from the cournot equilibrium? b) for what level of qi would firm 2 be deterred from entering? would a rational firm 1 have an incentive to choose this level of qi? which entry condition does this market have: blockaded, deterred, or accommodated? now suppose that firm 2 has to incur a fixed cost of entry, f> 0. c) for what values of f will entry be blockaded? d) find out the entry deterring level of q, denoted by q1', a expression for firm l's profit, when entry is deterred, as a function of f. for what values of f would firm 1 use an entry deterring strategy?