Week Six Assignment
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1. (1) Low Barriers to Entry: Although there is a cost to entering this type of market, there are relatively few barriers, such as cooperative or union dues.
(2) Imperfect Information: In a monopolistic competition, asymmetric information from buyer to buyer, seller to seller, and vice versa is common.
(3) Many buyers and sellers: The market has many buyers and vendors, much like the ideal competitive market. In other words, in this type of market, neither a single supplier monopoly nor a single buyer monopoly exist.
2. Herfindahl-Hirschman Index: The HHI is a measure of market concentration that considers the relative size distribution of firms in a market. It is calculated by squaring the market share of each firm competing in the market and then summing those numbers. The HHI, for instance, is 2,600 for a market with four firms and shares of 30, 20, and 20% (30 2 + 30 2 + 20 2 + 20 2 = 2,600). It takes into account the market's relative firm size distribution. It decreases to zero when a market is dominated by many enterprises all with the same maximum size and increases to a maximum of 10,000 points when one firm dominates the market.
Groupon:
an online coupon company. It provides time-limited deals that require a minimum number of buyers. It had 30 American operating cities, 120 staff members, 2 million subscribers,
and $33 million in revenue in 2009. By the end of 2010, it had 4,000 employees, 51 million members, and $760 million revenue while operating in 565 cities throughout the world. With a market share of more than 60% in the US in 2011, the company's first quarter 2011 revenue of $645 million was almost as high as the total revenue for 2010.
McDonald’s:
A company that invests heavily in maintaining its brand name to differentiate itself from other companies. McDonald's invests money in protecting its brand identity, which sets it apart from competing businesses. The sum of money used to establish and keep a brand name does not indicate anything unique about the items offered by McDonald's. Less than 1% of the company's shares increased in morning trading. The stock, which has a $135 billion market value, has lost 11% of its value so far in 2020. According to the corporation, first-quarter sales at
its global name stores decreased by 3.4%. Burger King: Another fast-food chain restaurant that is weakly differentiated from McDonald's but offers similar satisfaction to customers. Burger King has moved its focus from current franchises, to seeking new franchisees. The company is focusing on strengthening their marketing, product pipeline, cooking platform, and emphasis on service and friendliness. The company’s percentage is at 2.5%, but declining because they are losing revenue. 3. In the short run, monopolistically competitive firms aim to maximize profit or minimize loss by producing the level of output where marginal revenue equals marginal cost. This is similar to the strategy used by both pure competitors and monopolists.
To illustrate this, we can refer to Figure 13.1a in the textbook. In this figure, a competitive firm produces an output where MR (marginal revenue) is equal to MC (marginal cost). The demand curve D1 shows that the firm charges a price of P1 for this level of output. However, in order to produce this output as determined by demand curve D2, the firm must charge a price of p
squared. If p squared is less than average total cost, then the firm incurs a per unit loss represented by A squared - p squared and a total loss represented by the red area on the graph.
In contrast, in the long run for monopolistically competitive firms, only normal profits are earned. If there is a short-run profit due to favorable market conditions or other factors attracting new rivals into the industry because entry is easy. As new firms enter and compete with existing ones, each firm's share of total demand decreases and they face more close-substitute products. This causes a shift in their demand curve to the left (represented as d cubed in Figure 13.1c).
The long-run equilibrium output for a typical firm becomes q cubed on this shifted demand curve. Any greater or lesser output will result in an average total cost that exceeds product price p cubed, leading to losses for the firm. Therefore, when an industry experiences short-run losses like those shown earlier with A squared - p squared as costs exceed revenues), some firms may exit or leave that industry in search of better opportunities or profitability in other markets during
long run equilibrium conditions.
4. In monopolistic competition, a firm is neither productive nor allocatively efficient in the long-
run equilibrium.Productive efficiency refers to producing goods at the lowest possible cost. However, in monopolistic competition, firms produce where their average total cost (ATC) exceeds the minimum average total cost (ATCmin). This means that they are not producing at the most efficient level and could potentially reduce costs by adjusting their production methods.
Allocative efficiency refers to producing goods at a quantity where marginal cost (MC) equals price (P). In monopolistic competition, firms set their prices higher than their marginal costs. This results in an under allocation of resources because consumers are willing to pay more for the product than it actually costs to produce. As a result, there is an inefficiency in resource allocation.These inefficiencies lead to excess production capacity at every firm in the industry and create an efficiency loss. The monopolistically competitive firm produces only q cubed units, which is less than what would be produced if it were operating efficiently. The size of this efficiency loss can be represented graphically as area acd. Due to these inefficiencies, monopolistically competitive firms are not able to achieve productive or allocative efficiency in the long-run equilibrium. 5. The firm is making a profit because they are willing to negotiate with customers and increase the amount of meals they serve during certain hours at the restaurant. This strategy is attracting more customers and increasing their revenue.By doing this, the firm is creating barriers for other firms to enter the market. These barriers come from the need to develop and advertise a product that is different from what their rivals offer. This makes it difficult for other firms to imitate them, as it would be costly for them to do so.
As a result of these actions, the demand curve for the firm's product will shift to the left. This means that there will be a decrease in demand for their product compared to before.When new firms enter the market and reduce demand to such an extent that the demand curve becomes tangent (touches) with the average total cost (ATC) curve at its profit-maximizing output level,
then the firm is making a normal profit. In other words, they are covering all their costs and earning just enough profit to stay in business.
6. (1) Control over price but mutual interdependence: In an oligopolistic market, each firm has the ability to set its own price and output levels, similar to a monopolist. However, unlike a monopolist, an oligopolist must consider the reactions of its rivals when making pricing decisions. This is because the actions of one firm can have significant effects on the other firms in the industry. Therefore, there is mutual interdependence among these firms as they strategically plan their pricing, product characteristics, advertising, and other strategies to maximize their profits.
(2) Entry barriers: Oligopolies often have high barriers to entry that prevent new competitors from entering the market easily. These barriers can be similar to those found in pure monopoly situations. One common barrier is economies of scale - where larger firms enjoy cost advantages due to their size and production capabilities. For example, in industries like aircraft manufacturing or copper mining, existing firms may already have achieved economies of scale that new entrants would find difficult to match with their smaller market share.
(3)
Mergers:
Some oligopolies emerge through mergers or acquisitions between competing firms in an industry. When two or more companies merge or combine forces, they increase their market share significantly and gain greater control over supply within the industry. This increased control allows them to influence prices more effectively and potentially achieve greater
economies of scale due to increased production capacity and purchasing power for inputs.
7. Dominant Firms:
The degree to which one or two firms dominate an industry is not shown by
the four-firm concentration ratio. Both of these industries have a 100% concentration ratio. While industry Y is an oligopoly that might be undergoing intense economic competition, industry X is a full monopoly. Economists concur that monopolistic power in industry X is far larger than in industry Y, despite the fact that both industries have similar 100% concentration ratios. In a second business, Y firms compete for a market share of 25% each. World Trade:
Because import competition from overseas suppliers is not taken into account, the
data in Table 14.1 may overestimate concentration because they solely consider output produced in the United States. Despite the fact that table 14.1 indicates that four American companies create 73% of the domestic tire output, it ignores the reality that a sizable majority of the truck and auto tires purchased in the United States are imports. Many of the largest foreign firms in the
world conduct business in the United States. Interindustry Competition:
Concentration ratios are based on various industry definitions. In this instance, they cover up strong interindustry competition between two items linked to various
industries. Because aluminum competes with copper in many applications, the high concentration ratio for the main aluminum industry understates competitiveness in that sector.
Localized Markets: While concentration ratios apply to the entire country, some product markets are quite localized due to high transit costs. Despite low national concentration ratios, they can nonetheless persist. The percentage of household refrigerators and freezers is 93%.
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Related Questions
1. Based on the best available econometric forecasts, market elasticity demand for your company's products is -2.5. Marginal cost to produce product is constant at $ 140. Determine the optimal price per unit, if:
a.You are a monopolist.
b.You compete with one another in the Cournot oligopoly.
c.You are competing with 9 other companies in the Cournot oligopoly.
2. The water pump company has succeeded in introducing a water pump that saves electricity, is easy to install, and is durable (guaranteed). Its high quality has given the company an early edge in the local and national markets, but the entry of highly skilled competitors may occur within the next 3 years. Assume that the income and expense relationship of the company is as follows:
TR = 22000Q - 15.6Q2
MR = dTR / dQ = 22000 - 31.2Q TC = 300000 + 4640Q + 10Q2
MC = dTC / dQ = 4640 + 20Q
Where TR is income (in thousands of rupiah), Q is quantity (in units), MR is marginal income (in thousands of rupiah), TC is total cost,…
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4. Imagine a market with demand P = 420 – Q in each period. Two firms are thinking about colluding. They each have cost C(Qi) = 60Qi. If they cooperate and behave as a monopoly, then they have a marginal revenue curve, MRm = 420 – 2Q, and a marginal cost curve, MCm = 60. If they are in a cartel, then the firms will split the monopoly production and profits. If they compete, then they face MRi = 420 – 2Qi – Q-I and MCi = 60.
a. If the firms stick to their agreement (cooperate), how much per-period profit do they each make?
b. If they are not able to maintain their agreement (compete), what is their per-period profit?
c. If one firm cheats on their agreement (deviate), how much does each firm make? Be sure to specify both the profit for the cheater and the firm cheated-on.
d. Suppose the firms assume that their interaction will last forever (r = 1) and they share the common discount value R. What is the lowest value of R such that both firms are willing to continue with the cartel…
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4. Imagine a market with demand P = 420 – Q in each period. Two firms are thinking about colluding. They each have cost C(Qi) = 60Qi. If they cooperate and behave as a monopoly, then they have a marginal revenue curve, MRm = 420 – 2Q, and a marginal cost curve, MCm = 60. If they are in a cartel, then the firms will split the monopoly production and profits. If they compete, then they face MRi = 420 – 2Qi – Q-I and MCi = 60.
d)Suppose the firms assume that their interaction will last forever (r = 1) and they share the common discount value R. What is the lowest value of R such that both firms are willing to continue with the cartel agreement described above?
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PRICE (Dollars per can)
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0
0
Demand
5
MR
10
15 20 25 30 35 40
QUANTITY (Thousands of cans of beer)
MC = ATC
45 50
Monopoly Outcome
When they act as a profit-maximizing cartel, each company will produce
information, each firm earns a daily profit of $
cans and charge $
, so the daily total industry profit in the beer market is $
per can. Given this
Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit the market. Again, assume the
two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.
Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the
collusive agreement.
to $
Therefore, you can conclude that total industry profit
Mays's deviation from the collusive agreement causes the price of a can of…
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Hand written asap plzzzzzzzzz
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Solve all questions compulsory......
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Answer completely.
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(a) There are two companies in the world that produce large passenger aircraft, Boeing, and Airbus. How would you characterize the market for large passenger aircraft, monopoly, perfectly competitive, monopolistically competitive or Oligopoly? Please explain.
Large passenger aircraft are defined as aircraft than can carry more than 150 passengers.
(b) The market for telephone services has become more competitive over time with the advancement of technology in the industry. Technology in the aircraft manufacturing industry has also advanced significantly. Why hasn’t this improvement in technology led to an increase in competition (Boeing and Airbus have been the only manufacturers in this industry for many years)? Please explain.
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Part G H I
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(c) Finally, let's assume you've been given the following information about maximum willingness
to pay for a computer and a monitor:
WTP Monitors
WTP Computer
$1,100
Chloe
$500
Evan
$600
$700
MC
$400
$200
(1) What is the highest profit you can make with no bundling? Who buys what?
(2) What is the highest profit you can make with pure bundling? Who buys what?
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Breakdown of a cartel agreement
Consider a town in which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.
Price
Quantity Demanded
Total Revenue
(Dollars per gallon)
(Gallons of water)
(Dollars)
5.40
0
0
4.95
40
$198.00
4.50
80
$360.00
4.05
120
$486.00
3.60
160
$576.00
3.15
200
$630.00
2.70
240
$648.00
2.25
280
$630.00
1.80
320
$576.00
1.35
360
$486.00
0.90
400
$360.00
0.45
440
$198.00
0
480
0
Suppose Sean and Yvette form a cartel and behave as a monopolist. The profit-maximizing price is $ __________ per gallon, and the total output is __________ gallons. As part of their cartel agreement, Sean and Yvette agree to split production equally. Therefore, Sean's profit is
$ __________ , and Yvette's profit is __________ .…
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6
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Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion?
a. The presence of a large number of firms in the industry
b. Intense quality competition among firms
c. High barriers to entry into the industry
d. An unstable demand for the product
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2) There are three identical firms in the market research industry. The demand is 1 – Q, where Q = q1 + q2 + q3. The marginal cost is zero.
b. Show that if two of the three firms merge (transforming the industry into a duopoly), the profit of these firms decreases. Explain why and use a table to show the changes.
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3. Breakdown of a cartel agreement
Consider a town in which only two residents, Carlos and Deborah, own wells that produce water safe for drinking. Carlos and Deborah can pump and
sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.
Price
Quantity Demanded
Total Revenue
(Dollars per gallon)
(Gallons of water)
(Dollars)
3.60
3.30
35
$115.50
3.00
70
$210.00
2.70
105
$283.50
2.40
140
$336.00
2.10
175
$367.50
1.80
210
$378.00
1.50
245
$367.50
1.20
280
$336.00
0.90
315
$283.50
0.60
350
$210.00
0.30
385
$115.50
420
per gallon, and the total
Suppose Carlos and Deborah form a cartel and behave as a monopolist. The profit-maximizing price is $
output is
gallons. As part of their cartel agreement, Carlos and Deborah agree to split production equally. Therefore, Carlos's profit is
24
and Deborah's profit is $
orice and sell half of the monopoly
Suppose that Carlos and Deborah have been successfully…
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Question 1
Suppose there is only one supplier in the market of product X. The following table shows partial information of product X and the supplier’s cost.
A. Determine the supplier’s profit-maximizing output quantity. Explain your answer. B. At what price should the supplier charge to maximize its profit? Explain your answer. C. Suppose at the profit-maximizing output quantity you have determined in part A, the average variable cost is $428.33 and the average total cost is $628.33. Calculate the total profit at the profit-maximizing output quantity.
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Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
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Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MC) of producing a can of
beer is constant and equals $0.60 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost TC) for each
firm.
Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model
requires that the two companies must equally share the output.)
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and
McCovey choose to work together.
PRICE (Dollars per can)
81°F
Sunny
1.00 Demand
F1
0.90 +
0.80
0.70
0.60
0.50
0.40 +
1030
F2
+
1
I
-0-
T
I
I
F3
F4
MC ATC
F5
DA
Monopoly Outcome
+
OL
F6
Q
A
F7
(?)
C
F8
5+
=
F9
F10
F11
F12
En
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PRICE (Dollars per can)
2.00
1.80
1.60
Demand
1.40
1.20
1.00 +
0.80
0.60
0.40
0.20
MC=ATC
MR
0
15
30
45
60 75 90
105 120
135
150
QUANTITY (Thousands of cans of beer)
Monopoly Outcome
When they act as a profit-maximizing cartel, each company will produce
information, each firm earns a daily profit of $
cans and charge $
so the daily total industry profit in the beer market is $
per can. Given this
Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit in the market. Again, assume the
two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit.
Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the
collusive agreement.
Mays's deviation from the collusive agreement causes the price of a can of beer to
$
while McCovey's profit is now $
Mays increases…
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Oligopolies and Cartels
A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $1,000 per diamond, and the demand for diamonds is described by the following schedule:
Price
Quantity
(Dollars)
(Diamonds)
8,000
5,000
7,000
6,000
6,000
7,000
5,000
8,000
4,000
9,000
3,000
10,000
2,000
11,000
1,000
12,000
If there were many suppliers of diamonds, the price would be $______
per diamond and the quantity sold would be _________diamonds.
If there were only one supplier of diamonds, the price would be$______per diamond and the quantity sold would be ________diamonds.
Suppose Russia and South Africa form a cartel.
In this case, the price would be $__________ per diamond and the total quantity sold would be ______ diamonds. If the countries split the market evenly, South Africa would produce ________ diamonds and earn a profit of $________.
If…
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Oligopolies and Cartels
A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $1,000 per diamond, and the demand for diamonds is described by the following schedule:
Price
Quantity
(Dollars)
(Diamonds)
8,000
5,000
7,000
6,000
6,000
7,000
5,000
8,000
4,000
9,000
3,000
10,000
2,000
11,000
1,000
12,000
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6. Why might a monopolist advertise heavily for its product even though it isn't
competing with any firm for market share?
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Its in the picture.
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Economics: Industrial Economics
Question:
A duopoly exists in the market for lumber in a town. It costs the first company, Big Cutters, $16 per cord of wood while it costs the second company, Pine Stackers, $10 per cord of wood. The local market demand curve for wood is Q-31,000-100P. Assume each has the capacity to serve the entire market and that they can only price in whole dollar amounts (i.e.$30, not $29.99).
Assume initially that Cutters and Stackers decide to collude and split the market.
How many cords of wood will they sell?
Choices:
A. 12,000
B. 9,000
C. 15,000
D. 20,000
2. What will be the price they charge?
Choices:
A. 190
B. 210
C. 110
D. 160
3. How much will Big Cutters produce?
Choices:
A. 9,000
B. 4,500
C. 0
D. 15,000
Now assume that collusion is not possible.
4. What is the Nash Equilibrium quantity that Pine Stackers
Choices:
A. 0
B. 15,300
C. 14,700
D. 29,500
5. What is the Nash Equilibrium price?
Choices:
A. 15
B. 112
C. 11
D. 157
Thank you for your…
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3. Breakdown of a cartel agreement
Consider a town in which only two residents, Daniel and Gabrielle, own wells that produce water safe for drinking. Daniel and Gabrielle can pump and
sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.
Price
(Dollars per gallon)
Quantity Demanded
Total Revenue
(Gallons of water)
(Dollars)
4.20
0
0
3.85
40
$154.00
3.50
80
$280.00
3.15
120
$378.00
2.80
160
$448.00
2.45
200
$490.00
2.10
240
$504.00
1.75
280
$490.00
1.40
320
$448.00
1.05
360
$378.00
0.70
400
$280.00
0.35
440
$154.00
0
480
0
Suppose Daniel and Gabrielle form a cartel and behave as a monopolist. The profit-maximizing price is $
output is
per gallon, and the total
gallons. As part of their cartel agreement, Daniel and Gabrielle agree to split production equally. Therefore, Daniel's profit is
and Gabrielle's profit is $
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Question 4: The main criticism that economists have about monopolies is that a monopoly
produces too little output and charges too high a price compared to a competitive market.
The chart below shows a hypothetical monopoly's Marginal Cost (MC) and Marginal Revenue
(MR) curves as well as the market demand (D) curve.
AC
MC
100
75
50
100
200
a) What is the quantity produced and price paid in this market if the monopoly seeks to
maximize profits?
(B)
What will be the profits made by the monopoly in this situation?
(C)
Where do economists say would be the socially optimal level of production?|
(D)
instead of producing at the level that maximizes social welfare?
Calculate the deadweight loss if the monopoly produces where it maximizes total profits
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Economics
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3. Based on the best available econometric estimates, the market elasticity of demandfor your firm’s product is -2. The marginal cost of producing your product is constant at $50.
a. What is your optimal per unit price if you are a monopolist?b. What is your optimal per unit price if you compete against one other firm in a Cournotoligopoly? What is your optimal per unit price if you compete against 20 other firms in aCournot oligopoly?c. What price pattern are you seeing between parts a and b? Explain why this makes intuitivesense (hint: at what price will you eventually sell your product if the number of firmscontinues to increase?).d. Suppose once again you are a monopolist, but your product sells to two different groups ofconsumers segmented by region. The east coast customers have demand elasticity equal towhat is shown above (-2) and your west coast customers have demand elasticity equal to -4.Determine the optimal prices under third-degree price discrimination. What conditions…
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Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
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Question 8MCQ
Which of the following statements is true?
Select one alternative:
O. Monopolies, like perfectly competitive markets, do not generate a deadweight loss.
O. Compared to perfectly competitive markets, monopolies generate much larger consumer surplus.
O. Compared to monopolies, perfectly competitive markets generate much smaller consumer surplus.
O. Compared to monopolies, perfectly competitive markets generate much larger consumer surplus.
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True or False: Monopolies often lead to higher prices and reduced consumer choice.
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Oligopolies and Cartels
A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $2,000 per diamond, and the demand for diamonds is described by the following schedule:
Price
Quantity
(Dollars)
(Diamonds)
8,000
2,000
7,000
3,000
6,000
4,000
5,000
5,000
4,000
6,000
3,000
7,000
2,000
8,000
1,000
9,000
If there were many suppliers of diamonds, the price would be$______
per diamond and the quantity sold would be _________diamonds.
If there were only one supplier of diamonds, the price would be $______
per diamond and the quantity sold would be ______ diamonds.
Suppose Russia and South Africa form a cartel.
In this case, the price would be $________ per diamond and the total quantity sold would be ________ diamonds.
If the countries split the market evenly, South Africa would produce __________ diamonds and earn a profit of…
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- 1. Based on the best available econometric forecasts, market elasticity demand for your company's products is -2.5. Marginal cost to produce product is constant at $ 140. Determine the optimal price per unit, if: a.You are a monopolist. b.You compete with one another in the Cournot oligopoly. c.You are competing with 9 other companies in the Cournot oligopoly. 2. The water pump company has succeeded in introducing a water pump that saves electricity, is easy to install, and is durable (guaranteed). Its high quality has given the company an early edge in the local and national markets, but the entry of highly skilled competitors may occur within the next 3 years. Assume that the income and expense relationship of the company is as follows: TR = 22000Q - 15.6Q2 MR = dTR / dQ = 22000 - 31.2Q TC = 300000 + 4640Q + 10Q2 MC = dTC / dQ = 4640 + 20Q Where TR is income (in thousands of rupiah), Q is quantity (in units), MR is marginal income (in thousands of rupiah), TC is total cost,…arrow_forward4. Imagine a market with demand P = 420 – Q in each period. Two firms are thinking about colluding. They each have cost C(Qi) = 60Qi. If they cooperate and behave as a monopoly, then they have a marginal revenue curve, MRm = 420 – 2Q, and a marginal cost curve, MCm = 60. If they are in a cartel, then the firms will split the monopoly production and profits. If they compete, then they face MRi = 420 – 2Qi – Q-I and MCi = 60. a. If the firms stick to their agreement (cooperate), how much per-period profit do they each make? b. If they are not able to maintain their agreement (compete), what is their per-period profit? c. If one firm cheats on their agreement (deviate), how much does each firm make? Be sure to specify both the profit for the cheater and the firm cheated-on. d. Suppose the firms assume that their interaction will last forever (r = 1) and they share the common discount value R. What is the lowest value of R such that both firms are willing to continue with the cartel…arrow_forward4. Imagine a market with demand P = 420 – Q in each period. Two firms are thinking about colluding. They each have cost C(Qi) = 60Qi. If they cooperate and behave as a monopoly, then they have a marginal revenue curve, MRm = 420 – 2Q, and a marginal cost curve, MCm = 60. If they are in a cartel, then the firms will split the monopoly production and profits. If they compete, then they face MRi = 420 – 2Qi – Q-I and MCi = 60. d)Suppose the firms assume that their interaction will last forever (r = 1) and they share the common discount value R. What is the lowest value of R such that both firms are willing to continue with the cartel agreement described above?arrow_forward
- PRICE (Dollars per can) 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 0 Demand 5 MR 10 15 20 25 30 35 40 QUANTITY (Thousands of cans of beer) MC = ATC 45 50 Monopoly Outcome When they act as a profit-maximizing cartel, each company will produce information, each firm earns a daily profit of $ cans and charge $ , so the daily total industry profit in the beer market is $ per can. Given this Oligopolists often behave noncooperatively and act in their own self-interest even though this decreases total profit the market. Again, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Mays decides to break the collusion and increase its output by 50%, while McCovey continues to produce the amount set under the collusive agreement. to $ Therefore, you can conclude that total industry profit Mays's deviation from the collusive agreement causes the price of a can of…arrow_forwardHand written asap plzzzzzzzzzarrow_forwardSolve all questions compulsory......arrow_forward
- Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward(a) There are two companies in the world that produce large passenger aircraft, Boeing, and Airbus. How would you characterize the market for large passenger aircraft, monopoly, perfectly competitive, monopolistically competitive or Oligopoly? Please explain. Large passenger aircraft are defined as aircraft than can carry more than 150 passengers. (b) The market for telephone services has become more competitive over time with the advancement of technology in the industry. Technology in the aircraft manufacturing industry has also advanced significantly. Why hasn’t this improvement in technology led to an increase in competition (Boeing and Airbus have been the only manufacturers in this industry for many years)? Please explain.arrow_forwardPart G H Iarrow_forward
- (c) Finally, let's assume you've been given the following information about maximum willingness to pay for a computer and a monitor: WTP Monitors WTP Computer $1,100 Chloe $500 Evan $600 $700 MC $400 $200 (1) What is the highest profit you can make with no bundling? Who buys what? (2) What is the highest profit you can make with pure bundling? Who buys what?arrow_forwardBreakdown of a cartel agreement Consider a town in which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 5.40 0 0 4.95 40 $198.00 4.50 80 $360.00 4.05 120 $486.00 3.60 160 $576.00 3.15 200 $630.00 2.70 240 $648.00 2.25 280 $630.00 1.80 320 $576.00 1.35 360 $486.00 0.90 400 $360.00 0.45 440 $198.00 0 480 0 Suppose Sean and Yvette form a cartel and behave as a monopolist. The profit-maximizing price is $ __________ per gallon, and the total output is __________ gallons. As part of their cartel agreement, Sean and Yvette agree to split production equally. Therefore, Sean's profit is $ __________ , and Yvette's profit is __________ .…arrow_forward6arrow_forward
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