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    Equilibrium price & Competitive Market Assignment

    1.     Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is often contracted out to office maintenance firms, and both technology and labor requirements are very basic.  Supply and demand conditions in this perfectly competitive service market in New York  are:

                Supply:        QS = 2P – 20

    Demand:      QD = 80 – 2P,        where

    Q = thousands of hours of floor reconditioning per month

    P = the price per hour.

    a.      Algebraically determine the market equilibrium price/output combination.

    b.     Use a graph to confirm your answer.

    For the graph, use prices: 10, 20, 30, 40, 50, 60, 70, 80, 90

    • The figure below shows a firm in a perfectly competitive market.

    A.   Find the price below which the firm will go out of business.

    B.    What is the firm’s long run supply curve?

    3.Suppose two competitors, Coa, Inc., and Han, Inc., are locked in a bitter pricing struggle in the aluminum industry. In the limit pricing payoff matrix, Coa can choose a given row of outcomes by offering a limit price (“up”) or monopoly price (“down”). Han can choose a given column of outcomes by choosing to offer a limit price (“left”) or monopoly price (“right”). Neither firm can choose which cell of the payoff matrix to obtain; the payoff for each firm depends upon the pricing strategies of both firms

    • Is there dominant strategy equilibrium in this problem? If so, what is it?
    • Is there Nash equilibrium in this problem? If so, what is it?


    • What is the firm’s Total Revenue?
    • What is the Total Cost?
    •  What is the firm’s Total Profits?
    • If the above monopolist were to behave like a perfectly competitivefirm (operating in the long run), determine its output.

    5. Visit the following web sites:

    Review the most recent 6 months of data on real GDP growth, inflation/CPI, unemployment, Interest rates, consumer confidence index, consumer sentiment index, inventory level, and other relevant economic data. 

    Based on the collected data, analyze the current macroeconomic situation and its impact on Walmart and Starbucks.  Explore in particular how the two companies’ respond to the macroeconomic conditions in terms of their:

    • stock performance,
    • current and future sales revenue,
    • current and future profits,
    • labor costs, and
    • hiring decisions.

    Support your analysis and conclusions with data from BEA, BLS, The Conference Board, US Census Bureau, NBER, and the Federal Reserve. All references must be carefully cited.  Wikipedia is not allowed as reference sources please.

    Your paper should not exceed four pages (cover and reference pages not included) and should meet the APA format and reference requirements.

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