Mark if the following statements are true (T) or false (F) (i) If costs are sub-additive and concave, the natural monopoly is sustainable. (ii) The von-Stackelberg leadership model is close to competitive model than the Cournot (iii) If there are "search costs", P = MC is not a unique equilibrium (iv) The Ramsey price maximizes the welfare, subject to zero profits

Mark if the following statements are true (T) or false (F) (i) If costs are sub-additive and concave, the natural monopoly is sustainable. (ii) The von-Stackelberg leadership model is close to competitive model than the Cournot (iii) If there are "search costs", P = MC is not a unique equilibrium (iv) The Ramsey price maximizes the welfare, subject to zero profits

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 1.1CE

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Mark if the following statements are true (T) or false (F) (i) If costs are sub-additive and concave, the natural monopoly is sustainable. (ii) The von-Stackelberg leadership model is close to competitive model than the Cournot (iii) If there are “search costs”, P = MC is not a unique equilibrium (iv) The Ramsey price maximizes the welfare, subject to zero profits Ans all otherwise don't answer
Price rigidity, collusion, and booms. (This follows Rotemberg and Saloner 1986.) Suppose that a sector, with N firms, faces the demand function, p = e - bq, where e is Li.d. and uniform on [0, IJ. The marginal cost of production is equal to zero. (a) Suppose that the N firms collude to achieve the monopoly outcome. Determine the monopoly price and quantity (assuming that prices are set after e is realized). (b) Determine the profit of each firm if the sector behaves as a monopolist. (c) What is the relation between e and the incentive to cheat, that is, the incentive for any of the N firms to post a price e lower than the others? (d) Suppose that there is a fixed punishment K for firms that do not cooperate. Write down e·, the value of the shock such that firms are indifferent between colluding and cheating. Derive the price charged by the sector as a function of e. What is the highest sustainable price when e exceeds e* (e) Suppose that the punishment is that if a firm…
A nightclub manager realizes that demand for drinks is more elastic among students, and is trying to determine the optimal pricing schedule. Specififically, he estimates the following average demands: • Under 25: qr= 18 − 5p • Over 25: q = 10 − 2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the nightclub $2 each. (a) If the market cannot be segmented, what is the uniform monopoly price? (b) If the nightclub can charge according to whether or not the customer is a student but is limited to linear pricing, what price (per drink) should be set for each group? (c) If the nightclub can set a separate cover charge and price per drink for each group, what two-part pricing schemes should it choose? (d) Now suppose that it is impossible to distinguish between types. If the nightclub lowered drink prices to $2 and still wanted to attract both types of consumers, what cover charge would it set? (e) Suppose that the nightclub again restricts itself…
Consider a monopoly that sells a product to consumers with a constant marginal cost of $13. There are two potential consumers. As a prior belief, each consumer thinks that the product is worth either $29 or $19 with equal probability, and he/she learns the true value of the product after trying it out. Each consumer may have a different perception of the value of the product, and these perceptions are independent events. The product is non-durable. Suppose there are two periods and each consumer demands at most one unit of the product in each period. After the first period, a company named InfoteX could conduct an online marketing survey to learn consumers perceptions of the product. By purchasing the survey from InfoteX, the monopolist knows whether a consumer is happy with the product (i.e., he/she thinks the product is worth $29 instead of $19 after trying it out) or not and can offer personalized prices to customers in the second period. Then the monopolist should charge $_______…
Suppose a certain city has a monopoly cable-television company. This company has total costs TC = 0.25Q2 + 30Q + 70. (Hint: using calculus, this means MC = 0.5Q+ 30since MC is the derivative of TC with respect to output.) The demand in the community is approximated by the equationQd = 60- P/2(alternatively, you can write the demand equation as Qd = 60–0.5P). Graphically depict the demand curve as well as the marginal cost (MC) curve. If the cable company is free to choose its own pricePm and quantityQm, graphically depictthe monopoly equilibrium price and quantity. Add any other curve(s) to your diagram that may be required to obtain this outcome. Compute and state the exact monopolist equilibrium pricePm and quantityQm that you depicted graphically.
PLEASE SOLVE ONLY PART (iv): B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model.
True/False 1. In a principal-agent relationship between owner and manager with hidden e§ort, the owner can design a wage scheme that insures the optimal Örst best e§ort by the manager regardless of the risk aversion of the manager. Justify your answer. 2. Consider a monopoly that faces an inverse demand curve and has a linear cost function. The monopoly would be indi§erent when maximizing proÖts between either choosing quantities or choosing prices. 3. A multiproduct Örm that as monopoly power over several products sets lower prices than separate Örms (each controlling a single product) when the products are substitutes or when there are economies of scope. 4. In the dominant Örm model (‡ la Hotelling) an increase in the marginal cost of the dominant Örm (with constant marginal costs) implies that proÖts necessarily decrease. 5. Suppose that an industry has 10 Örms where the market shares are ordered from the most to the least dominant Örm f0:5; 0:37; 0:05; 0:03; 0:02; 0:01;…
The Incumbent operates in the market for good A. The Inverse demand function Is given by p= 110 - Q. Incumbent's total cost equals TC(q)=10q (a) Find the monopoly output and profit (b) A new firm with the same technology can enter the market by paying the setup cost F= 225. In this case, the firms will compete in the Stackelberg way: the Incumbent will set q1 and after that having observed q, the entrant will choose q2. Find the optimal output q1. (Hint: consider two cases: entry Istrategic entry deterrence.)
Take a market that fulfills the monopoly model assumptions. Inverse demand is P = 40-Q and marginal cost MC 4+2Q. Find the equilibrium price, quantity, consumer surplus, producer surplus, total surplus, and deadweight loss.
The Tourist-Trap model describes a situation where the existence of a search cost, c, and price ignorance of buyers lead to an equilibrium in which all sellers practice the monopoly price. This result holds... (a) ... only when the number of sellers is small (b) ... only when search costs are high (c) ... for any search cost c > 0 (d) ... even when buyers can buy repeatedly at the same location thus gradually learning the prices practiced by other sellers
The following question pertains to dominant firm price leadership. Suppose a dominant firm has determined the price for its industry. Then suppose there is an increase in hte price of a substitute product. How will the dominant firm's price, dominant firm's quality, and the fringe firms' quality be affected?
Choose the most appropriate answer. 1.1 Read the following extract and answer question 1.1, 1.2. Evidence of dominationBoth the Competition Commission and Icasa found, in their inquiries, that Vodacom and MTN are dominantacross the supply chain. Their dominance is even more entrenched by the spectrum-sharing deals that they haveentered into with Cell C, Liquid Intelligent Technologies and Rain. Cell C is wholly reliant on MTN and Vodacomto provide mobile services, and Liquid and Rain are disincentivised from competing aggressively in the mobilemarket due to the lucrative deals they have struck to provide capacity to either Vodacom or MTN, or both. Thishas limited their ability to compete independently – leaving Telkom as the only entity in the position to be able tochallenge the “cosy” market structure head-on.Source: https://techcentral.co.za/mcleod-is-wrong-about-telkom/110373/Accessed: 19/08/21 The economic argument being expressed in this extract is that of __________ and has the…