4:21lLTEWork13. In the Nash equilibrium of a prisoner'sdilemma:14. Suppose Acme and Mega produce andsell identical products and face zeromarginal and average cost. Below is themarket demand curve for their product432D0050200100150QuantitySuppose Acme and Mega decide to colludeand work together as a monopolist with eachfirm producing half the quantity demanded bythe market at the monopoly price. If Megacheats on the agreement by red ucing its priceto $1 and Acme matches the price cut, then ifconsumers are evenly split between the twofirms, Acme's economic profit will bePrice ($/unit)

Prisoner’s dilemma is a two criminals’ game and the outcome depends on the simultaneous decisions…

Answered: 4:21 lLTE Work 13. In the Nash…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

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Similar questions

Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
How does the demand curve perceived by a monopolist compare with the market demand curve?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term-that the incentives for individual members. to cheat would become too strong. More than fort),r years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? Hint: You may wish to consider non-economic reasons.
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
Why would a firm choose to use one or more of the anticompetitive practices described in Regulating Anticompetitive Behavior?
Is it true that the four-firm concentration ratio puts more emphasis on one or two very large films, while the Herfindahl-Hirshmau Index puts more emphasis on all the films in the entire market? Explain briefly.
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not?

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