entry game. Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard", firm B ensures that firm A makes a loss of $1 million, but firm B only makes $1 million in profits. On the other hand, if firm B plays "soft", the
goods because to gain revenue. 3a. Economists call people like Charlie as free rider. b. The government solve the problem caused by people like Charlie by making the channels private so viewers must pay when they watch them. c. With tax, private market can solve this problem. The existence of cable TV alter the situation by the tax revenue to help the TV station. 9. They might do this because when the fare is higher, it will internalize this externality. People will take the subway less during
where its demand curve is elastic. Question 2 10 out of 10 points Suppose a firm is currently maximizing its profits (i.e., following the MR=MC rule). Assuming that it wants to continue maximizing its profits, if its fixed costs increase, it should Answer Selected Answer: maintain the same price. Correct Answer: maintain the same price. Question 3 10 out of 10 points A firm that seeks to maximize its revenue is most likely to adhere to which of the following?
ECO 561 Final Exam w/ corrected answers 1) Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information you can conclude that A. the supply of clothing has grown faster than the demand for clothing [B. demand for clothing has grown faster than the supply of clothing] C. the supply of and demand for clothing have grown by the same proportion D. there is no way to determine what has
marginal cost will cause a monopolist to reduce his price. 2. Economist Harvey Leibenstein argued that the loss of economic efficiency in industries that are not perfectly competitive has been understated. He argued that when competition is weak, firms are under less pressure to adopt the best techniques or to hold down their costs. He referred to this effect as "x-inefficiency." If x-inefficiency causes a firm's marginal costs to rise, show that the deadweight loss in Figure 10.10 understates the
Week 6 Assignment 2 Submission Click the link above to submit your assignment. Students, please view the "Submit a Clickable Rubric Assignment" in the Student Center. Instructors, training on how to grade is within the Instructor Center. Assignment 2: Operations Decision Due Week 6 and worth 300 points Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates. Use the Internet
Should firms’ price discriminate? Why or why not? ECONS10081 9485293 18th of November 2014 Price discrimination is charging different people for different price for the same products or services. The benefits are higher income by extracting the consumer surplus and transforming it to supernormal profit and increase the market power. The disadvantage is purchasers have their doubts when their information are being captured and it is crucial for retailers to try to maintain trust. Otherwise firm may
marginal cost, which is the change in total costs from increasing output by one extra unit. The formula for MC is 'change in total cost divided by change in quantity’. Therefore if the variable unit of production is increased, there comes a point where it will become less productive and therefore there will eventually be a decreasing marginal and then average total cost. That means that the MC falls due to difficulty to increase productivity when one unit is fixed. However if the marginal cost increase
monopoly can undercut potential competitors that may enter the market. Economies of scale mean that their average costs are lower than that of new market entrants (Stiglitz et. al. 2014 pp. 167-8). However, when the market is contestable, such as for domestic airline routes, the mere threat of potential competition is sufficient to keep prices low and prevent abuse of monopoly power (Pettinger n.d.). A monopolist in a contestable market will not set prices above average costs (P_C) and maintains zero
Task 1: Consider the following table of costs for the Winsome Widget Factory, which operates in a perfectly competitive market. The market price faced by this firm is $6.00 per widget. a. Fill in the formula for Average Fixed Cost, Average Variable Cost, Average Total Cost, Marginal Cost, Total Revenue, Marginal Revenue, and Total Profit at the top of the column in the gray section within the table. b. Fill in the missing values for Total Fixed Cost, Total Variable Cost, Average Fixed Cost