A check for $120 arrives at Mad magazine on June 1st, 1988 for payment of a year’s subscription of magazines. Starting in July, 1988, the magazines are delivered monthly for the next twelve months. As a result of this activity: X: Net income increases in 1988 by $120

Y: earnings increase by $70 in 1988 and $50 in 1989

A. X
B. Y
C. Both
D neither

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Suppose that two firms produce differentiated products and compete in prices. as in class, the two firms are located at two ends of a line one mile apart. consumers are evenly distributed along the line. the firms have identical marginal cost, $60. firm b produces a product with value $110 to consumers.firm a (located at 0 on the unit line) produces a higher quality product with value $120 to consumers. the cost of travel are directly related to the distance a consumer travels to purchase a good. if a consumerhas to travel a mile to purchase a good, the incur a cost of $20. if they have to travel x fraction of a mile, they incur a cost of $20x. (a) write down the expressions for how much a consumer at location d would value the products sold by firms a and b, if they set prices p_{a} and p_{b} ? (b) based on your expressions in (a), how much will be demanded from each firm if prices p_{a} and p_{b} are set? (c) what are the nash equilibrium prices?

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