4:21 lLTE Work 9. Suppose Campus Books, a profit- maximizing firm, is the only supplier of the textbook for a given class. The marginal cost of supplying each book is constant and equal to $10, and Campus Books has no fixed costs. The table below shows the reservation prices of the eight students enrolled in the class. Reservation Price Student (SBook) 60 54 48 42 U 36 V 30 24 18 If Campus Books is permitted to charge 2 prices, and the bookstore knows customers with a reservation price above $30 never bother with coupons, whereas those with a reservation price of $30 or less always use them, then the bookstore will set the list price of the book to be and the discounted price of the book to be RST

What is predatory pricing? How might it reduce competition, and why might it be difficult to tell when it should be illegal?

For each of the following pairs of firms, explainwhich firm would be more likely to engage inadvertising.a. a family-owned farm or a family-ownedrestaurantb. a manufacturer of forklifts or a manufacturer of carsc. a company that invented a very comfortable razoror a company that invented a less comfortable razor

part 9 10 11 9. How doesthe price and output of a monopolist differ from thatofthe perfectly competitive A:industry? i.10. Whatportion of the consumer surplusin the competitive situation wastransferredto the firm inthe monopoly situation?11. How does a monopoly affect consumersurplus? Is this good or bad?

onsider the table below and assume the market price is $35 per unit. Totalproduct Totalfixed cost TotalVariablecost 0 150 0 1 150 50 2 150 75 3 150 112.4 4 150 150 5 150 200 6 150 270 7 150 360 8 150 475 9 150 620 10 150 800 Now assume there are 600 identical firms in this industry, that is, there are 600 firms, each of which has the same cost data as the single firm discussed above. Suppose, too, that the demand curve for this industry is as follows: Price Quantitydemanded $20 6,800 30 5,975 45 5,500 60 5,125 75 4,500 95 4,200 120 3,600 150 2,400 In equilibrium each firm will realize: Multiple Choice an economic profit of $155. a loss of $45. an economic profit of $35. a loss of $135.

Firms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?

A small town is served by many competingsupermarkets, which have the same constantmarginal costs.a. Using a diagram of the market for groceries, showthe consumer surplus, producer surplus, and totalsurplus.b. Now suppose that the independent supermarketscombine into one chain. Using a new diagram,show the new consumer surplus, producer surplus,and total surplus. Relative to the competitivemarket, what is the transfer from consumers toproducers? What is the deadweight loss?

There is much evidence that large firms with considerable market power (firms such asmonopolies) may not maximize profits but may pursue quite different objectives such asgrowth or sales revenue maximization. What are the arguments put forward to defendmonopoly? Name any 5         Generally, the aim of a business is to maximize profit. Which point should a firm operateat in order to achieve maximum profit? By making use of a graph indicate clearly the pointat which a firm makes maximum profit and a point where a firm increase their output inorder to enhance profit as well as well as the points where they should reduce theirproduction if they want to enhance profit

DuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the quantity of pencilstraded if the firms couldn’t cooperate?

Complete the table below and graph the AR, MR, MC, and AC Q Price TR AR MR TC MC Profit 0 30 0 0 0 70   -70 5 27 135 27 27 135   0 10 24 240 24 21 197   43 15 21 315 21 15 252   63 20 18 360 18 9 300   60 25 15 375 15 3 345   30 30 12 360 12 -3 383   -23 35 9 315 9 -9 428   -113 40 6 240 6 -15 478   -238 45 3 135 3 -21 533   -398 50 0 0 0 -27 593   -593 Provide a brief explanation of the firm's behavior to set production at 20 units at the price of P18 per unit.