Open Word and answer the following questions. Save the document and print it when you are done. Suppose the price distribution of 100 firms is uniform, with an average price of $50 and an SD of...

Open Word and answer the following questions. Save the document and print it when you are done. Suppose the price distribution of 100 firms is uniform, with an average price of $50 and an SD of $28.87. Search cost, c, is $1 per price.

1. On what interval (from the minimum to the maximum) are prices equally likely to fall?

2. Implement this problem in the Setup sheet and run a Monte Carlo simulation with a sample size of 20. Take a picture of your results (like Figure 1.7.1.3) and paste it in your Word document. What’s good about obtaining 20 prices? What’s bad?

3. Use the equation for the average minimum price as a function of n for this distribution,
to find the optimal sample size. Show your work.

4. Find the c elasticity of n∗ at q = c = 1. Show your work.