10.13 neous10.13. ALTERNATIVE PRODUCTION TECHNOLOGIES. Consider an industry with a homoge-rod (d)product where firms set output (or capacity) levels and price is determined bytotal output (or capacity). Suppose there is a large number of potential entrants and thateach firm can choose one of two possible technologies, with cost functions C₁ = F; + C¡ qi(i = 1,2).Godmod(a) Derive the conditions for a free-entry equilibrium.(b) Show, by means of a numerical example, that there can be more than oneequilibrium, with different numbers of large and small firms.10.14. HERFINDAHL INDEX BOUNDS. Suppose you only know the value of the marketshares for the largest m firms in a given industry. While you do not possess sufficientinformation to compute the Herfindahl index, you can find a lower and an upper boundfor its values. How?10.15. PRODUCT DIFFERENTIATION AND MARKET STRUCTURE. Consider the monopolisticcompetition model, presented in Section 4.3. What is, according to this model, the rela-tion between the degree of product differentiation and market structure?10.16. DOCTORS AND PLUMBERS. Consider the structure of geographically isolated mar-kets in the US (small towns) in the following businesses: doctors, dentists, plumbers. Itcan be shown that the minimum town size that justifies the entry of a second doctor is

In economics, free entry is a situation in which firms can freely enter the market for an economic…

neous 10.13. ALTERNATIVE PRODUCTION TECHNOLOGIES. Consider an industry with a product where firms set output (or capacity) levels and price is deter total output (or capacity). Suppose there is a large number of potential entrant each firm can choose one of two possible (i = 1,2). technologies, with cost functions C₁ = (a) Derive the conditions for a free-entry equilibrium. (b) Show, by means of a numerical example, that there can be more tha equilibrium, with different numbers of large and small firms.

neous 10.13. ALTERNATIVE PRODUCTION TECHNOLOGIES. Consider an industry with a product where firms set output (or capacity) levels and price is deter total output (or capacity). Suppose there is a large number of potential entrant each firm can choose one of two possible (i = 1,2). technologies, with cost functions C₁ = (a) Derive the conditions for a free-entry equilibrium. (b) Show, by means of a numerical example, that there can be more tha equilibrium, with different numbers of large and small firms.

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 6E

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