The Nintari Company produces video-game-playing machines and a second firm, Necsega, owns exclusive rights to manufacture games that can be used with the Nintari game machine. Both of these imperfectly competitive firms are maximizing profits. If Nintari buys Necsega and nothing else changes, then how will Nintari adjust prices of game machines and games to maximize profits?
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- Consider a firm that operates in a market that competes aggressively in prices. Due to the high fixed cost of obtaining the technology associated with entering this market, only a limited number of other firms exist. Furthermore, over 70 percent of the products sold in this market are protected by patents for the next eight years. Does this industry conform to an economist’s definition of a perfectly competitive market?Suppose that, prior to other firms entering the market, the maker of a new smartphone (Way Cool, Inc.) earns $80 million per year. By reducing its price by 60 percent, Way Cool could discourage entry into “its” market, but doing so would cause its profits to sink to −$2 million. By pricing such that other firms would be able to enter the market, Way Cool’s profits would drop to $30 million for the indefinite future. In light of these estimates, do you think it is profitable for Way Cool to engage in limit pricing? Is any additional information needed to formulate an answer to this question? Explain.The fastfood industry can be considered a perfectly competitive industry between two competitive firms: Jollibee and McDonalds. The total cost function of one of the firms is expressed by C(Q) = 100 + 4Q2, and demand is P = 80 – 4Q Find the equilibrium price and total quantity that the industry produces. Suppose that Jollibee successfully acquired McDonalds through a hostile takeover. What would be the new equilibrium price and quantity if MR = 80 – 4Q? Is this hostile takeover beneficial?
- Sort the following characteristics by whether they describe competitive markets, firms that can perfectly price discriminate, both, or neither.Since firms are slow to change the prices they charge for their products, are firms more or less likely to be able to pursue an effective markup pricing strategy in their pursuit of positive economic profit, when the economy is heading into a recession? Explain your answer.Q17 Assume that the cannabis firm called Aphria Inc. purchases resources a and b under perfectly competitive conditions and combines these resources to produce marijuana. Assume marijuana is sold in a perfectly competitive market. The MPs of a and b are 12 and 6, respectively, and the prices of a and b are $6 and $3, respectively. If profit-maximizing equilibrium exists, the price of marijuana will be Multiple Choice $0.50. $2. $6.67. $5. $1.
- True/False Perfect competitive market situation is almost impossible in real life.What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be A. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market. B. many buyers and nothingsellers, with all firms selling identical products, and substantial barriers to new firms entering the market. C. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market. D. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.The Zinger Company manufactures and sells a line of sewing machines. Demand per period (Q) for a particular model is given by the following relationship:Q = 400 − .5Pwhere P is price. Total costs (including a "normal" return to the owners) of producing Q units per period are:TC = 20,000 + 50Q (a) Express total profits (π) in terms of Q. (b) At what level of output are total profits maximized? What price will be charged? What are total profits at this output level? (c) What model of market pricing has been assumed in this problem? Justify your answer.
- Why can't a perfectly competitive firm charge a price premium (sell at a higher price) relative to other firms in the industry (what would happen if a firm attempted to do so)? What is the term given to perfectly competitive firms since they must sell at the market equilibrium price?The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer. Question 5 options: in the short-run, the demand curve and average revenue shift as other firms enter the market and increase competition. in the short-run, the demand curve and average revenue shift as other frims leave the market and decrease competition. in the long-run, the demand curve and average revenue shift as other frims enter the market and increase competition. in the long-run, the demand curve and average revenue shift as other frims leave the market and decrease competition.Use the following demand-and-cost information vis-à-vis three firms: Firm A, Firm B and Firm C operating in three different market structures in the short run, to answer the questions that follow. Firm A Firm B Firm C Price where output is equal to zero (R) 2000 1500 60 Profit maximising price (R) 1000 ? 60 Profit maximising output level (units) 30 50 2500 MC at profit maximising output level (R) ? 275 60 ATC at profit maximising output level (R) 1300 ? 36 AVC at profit maximising output level (R) 900 300 ? Minimum ATC (R) 1200 320 30 Minimum AVC (R) 800 280 3 Price at allocative efficient output level (R) 160 580 ? Allocative efficient level of output (units) 150 200 2500 Lerner index 0.8 ? 0 Total Fixed Cost (R) ? 2000 75000 Total Variable Cost at profit maximising output level (R) 27000 15000 ? Mark-up ? 4 ? Calculate each of…