1. Market demand for gizmos is P = 750 − 0.5Q. Suppose there are two firms in the gizmo industry, selling identical products. Firm 1’s cost function is , and firm 2’s cost function is C2(Q2) = 10Q2. (a) Suppose that the gizmo firms compete on quantity and move simultaneously (i. e., they are in a Cournot duopoly). i. Derive each firm’s best response function. ii. Find the Cournot equilibrium levels of output for each firm. iii. Find the market price and profits for each firm. (b) Suppose instead that firm 1 is able to start production before firm 2. i. Find the Stackelberg equilibrium levels of output for each firm. ii. Find the market price and profits for each firm. (c) Comparing the two duopoly situations, does the Cournot or Stackelberg duopoly result in greater industry profits? Which situation does firm 1 prefer? Which situation does firm 2 prefer?

In the fall, jay thompson decided to live in a university dormitory. he signed a dorm contract under which he was obligated to pay the room rent for the full college year. one clause stated that if he moved out during the year, he could sell his dorm contract to another student who would move into the dormitory as his replacement. the dorm cost was $5000 for the two semesters, which jay had already paid a month after he moved into the dorm, he decided he would prefer to live in an apartment. that week, after some searching for a replacement to fulfill his dorm contract, jay had two offers. one student offered to move in immediately and to pay jay $300 per month for the eight remaining months of the school year. a second student offered to move in the second semester and pay $2500 to jay. jay estimates his food cost per month is $500 if he lives in the dorm and $450 if he lives in an apartment with three other students. his share of the apartment rent and utilities will be $404 per month. assume each semester is 4.5 months long. disregard the small differences in the timing of the disbursements or receipts. what is the cost of the cheapest alternative?

On january 1, vermont corporation had 40,000 shares of $10 par value common stock issued and outstanding. all 40,000 shares has been issued in a prior period at $20.00 per share. on february 1, vermont purchased 3,750 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on march 1. the journal entry to record the purchase of the treasury shares on february 1 would include a credit to treasury stock for $90,000 debit to treasury stock for $90,000 credit to a gain account for $112,500 debit to a loss account for $112,500

Sauer food company has decided to buy a new computer system with an expected life of three years. the cost is $440,000. the company can borrow $440,000 for three years at 14 percent annual interest or for one year at 12 percent annual interest. assume interest is paid in full at the end of each year. a. how much would sauer food company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 12 percent rate? compare this to the 14 percent three-year loan.