Consider the following game between a monopolist and an entrant: Entrant Build Don't Build Build 0.5 -0.5 2.5 0 Monopolist Don't Build 2 0.5 3 0 f this game were played sequentially, and the entrant moved first, then the game: has a second mover advantage O does not have any first or second mover advantage has a first mover advantage
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- 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?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?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.)
- Some years ago. two intercity bus companies, Greyhound Lines, Inc. and Trailways Transportation System, wanted to merge. One possible definition of the market for this case was the market for intercity bus service. Another possible definition was the market for intercity transportation, including personal cars, car rentals, passenger trains, and commuter air flights.' Which definition do you think the bus companies preferred, and why?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?Classify the following as a government-enforced barrier to entry, a banker to entry that is not government enforced, or a situation that does not involve a barrier to entry. A City passes a law on how many licenses it will issue for taxicabs A city passes a law that all taxicab drivers must pass a driving safety test and have insurance A well-known trademark Owning a spring that offers very pure water An industry where economies of scale are very large compared to the size of demand in the market
- Many schemes for price discrintination involve somecosL For example, discount coupons take up the timeand resources of both the buyer and the seller. Thisquestion considers the implications of costly pricediscrimination. To keep things simple, let's assumethat our monopolist's production costs arc simplyproportional to output so that average total cost andmarginal cost arc constant and equal to each other.CHAPTER 15 MONOPOLY 317a. Draw the cost., demand, and marginal-revenuecurves for the monopolist. Show the pricethe monopolist would charge without pricediscrimination.b. ln your diagram, mark the area equal to the mernopolist's prolit and call it X. Mark the area equalto consumer surplus and call it Y. Mark the areaequal to the deadweight loss and call it Z.c. Now suppose that the monopolist can perfectlyprice discriminate. What is the monopolist'sprofit? (Give your answer in terms of X, Y, and Z.)d. What is the change in the monopolist's prolit fromprice discrimination? What is the…This chapter discusses companies that areoligopolists in the markets for the goods they sell.Many of the same ideas apply to companies that areoligopolists in the markets for the inputs they buy.a. If sellers who are oligopolists try to increase theprice of goods they sell, what is the goal of buyerswho are oligopolists?b. Major league baseball team owners have anoligopoly in the market for baseball players. Whatis the owners’ goal regarding players’ salaries?Why is this goal difficult to achieve?c. Baseball players went on strike in 1994 becausethey would not accept the salary cap that theowners wanted to impose. If the owners werealready colluding over salaries, why did they feelthe need for a salary cap?Consider the relationship between monopoly pricingand price elasticity of demand.a. Explain \\•hy a monopolist will never produce aquantity a t which the demand curve is inelastic.(Hint: If demand is inelastic and the firm raisesits price, what happens to total revenue and totalcosts?)b. Draw a diagram for a monopolist,. preciselylabeling the portion of the demand curve thatis inelastic. (Hint: The answer is related to themarginal-revenue curve.)c. On your diagram, show the quantity and pricethat maximize total revenue.
- Suppose that an inventor discovers a new chemical compound that can change the color of people’seyes with no negative side effects. Since she holdsa patent on this chemical, she has a monopoly overthe sale of the new eye-color treatment. However,she’s an inventor, not a businessperson. Explain toher how she should set the price for the eye-colortreatment in order to maximize her profits.A monopolist faces a demand curve given by q = 32 − 0.5p. Its costs are given by 0.5q2 + 100. (a) What is the monopolist’s profit maximizing choice of output? At what price does it sell its product? (b) Draw a graph that illustrates the monopolist’s choices. (c) If this were a competitive market, what would be the equilibrium price and quan- tity? (d) If the monopolist were forced to sell its output at the price that would arise in the competitive market, would it still be able to make a profit?I need help with econ multiple hw questions asap! 95) Which of these situations produces the largest profits for oligopolists? A. They produce a quantity of output that lies between the competitive outcome and the monopoly outcome B. They reach the monopoly outcome. C. They reach a Nash equilibrium. D. They reach the competitive outcome. 94) Refer to the attached Table 5. When this game reaches a Nash equilibrium, what will the value of trade flow benefits be? A. Canada $35 and Mexico $285 B. Canada $140 and Mexico $275 C. Canada $65 and Mexico $75 D. Canada $130 and Mexico $5