QUESTION 9 Collusion is easier to sustain when firms set prices rather than quantities because... price competition allows higher deviation profits. price competition implies higher deviation profits and lower punishment profits; the latter effect is less important. price competition implies higher deviation profits and lower punishment profits; the latter effect is more important. O ... price competition allows higher punishment profits. O … ***

QUESTION 9 Collusion is easier to sustain when firms set prices rather than quantities because... price competition allows higher deviation profits. price competition implies higher deviation profits and lower punishment profits; the latter effect is less important. price competition implies higher deviation profits and lower punishment profits; the latter effect is more important. O ... price competition allows higher punishment profits. O … ***

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.15P

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13. What is the maximum profit for the price(s)you listed for Question 12? (Question 12: How much should Frostee's Doggie Donuts charge to maximize its profit?) Answer to Questions 14 and 15 based on the Cost of Goods Sold increases from $3 to $4 due to higher ingredient costs. 14. How much should Frostee's Doggie Donuts charge to maximize its profit based on the above change? 15. What is the maximum profit for the price(s)you listed for Question 14?
Signaling. There are two firms, A and B. There are two time periods, 1 and2. There is one commodity, that can be produced by both firms, at linear cost. So,if firm i has marginal cost i, then the cost of producing q units of the commodity is ciq. The inverse demand for the commodity, at any given moment, is 100 − 4Q,where Q is the aggregate supply at that moment.In period 1, firm A is alone in the market. Firm A’s marginal cost is determinedby Nature, either it is 10 or it is 2, each with probability 1/2. A knows it’s cost.Firm A produces some quantity in period 1 and firm B observes this. Betweenperiods 1 and 2, firm B decides to enter the market or not. After making thisdecision, B is told firm A’s cost. It is too late at this point for B to change itsaction.In period 2, if B is in the market, then A and B compete on quantity.(1) In words, what are the steps to solving this problem?(2) There are two possible quantity-competition games that happen in this game.Solve them both.(3) Now…
Wonopoly and natural resource prices Suppose that a firm is the sole owner of a stock of a natural resource. a. How should the analysis of the maximization of the discounted profits from selling this resource (Equation 17.63 be modified to take this fact into account? b. Suppose that the demand for the resource in question had a constant elasticity form q(t)=a[p(t)]b . How would this change the price dynamics shown in Equation 17.67? c. How would the answer to Problem 17.7 be changed if the entire crude oil supply were owned by a single firm?
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For a firm with market power, what is the marginal revenue gained when one more unit of output is sold? Question 19Answer a. The price at which the extra unit is sold plus the rise in revenue from selling other units at a higher price b. The price of the unit of output sold minus the production cost of that unit c. The price of the unit of output sold d. The price at which the extra unit is sold less the drop in revenue from selling other units at a lower price
Assume that consumers view tax preparation services as undifferentiated among producers, and that there are hundreds of companies offering tax preparation in a given market. The current market equilibrium price is $170. Joe Audit’s Tax Service has a daily, short-run total cost given by TC = 1000 + 4Q2 + 10Q with marginal cost MC = 8Q + 10. How much will he earn in profit, found by total revenue minus total cost, each day?
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: A fixed cost of $50 thousand was incurred in setting up an operation. At time t months thereafter, the operation yields income at the rate of (20 – 0.3t) and incurs expenses at the rate of (10 – 0.1t); where both are in thousands of dollars per month. Sketch the graph. What is the optimal time to terminate the operation? What will total profit be at the optimal time of termination? Q#5: At market equilibrium, consumers demand 625,000 gallons of kerosene, whose supply function is, Ps(q) = 2.5 + 0.3 q3/2 , where q is in thousands of gallons and Ps(q) is in dollars per gallon. Compute producers’ surplus. Q#6: The demand function for a product is Pd(q) = 80 / (0.2 q + 1)2 , where q is in millions of tons and Pd (q) is in dollars per ton. Market equilibrium occurs at a demand for 15 million tons. Compute consumers’ surplus.
You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 − 15Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 3Q1 and MC2 = 2Q2 How much output should be produced in plant 1 to maximize profits? What price should be charged to maximize profits? Please show work for all three questions What price should be charged to maximize revenues?
Title Suppose that the fixed costs of 0.72 consist of an attributable fixed cost for good 1 of 0.12, an attributable cost of 0.12 for good 2, and a common fixed cost of 0.48. Are the Ramsey prices subsidy free? Description Suppose that there are two products. The demand function for good i is Qi = 1 − bi Pi where b1 = 1 and b2 = 0.5. There are no variable costs of production, but there is a common fixed cost equal to 0.72. (a) Show that the inverse demand curves are Pi = (1 − Qi )/bi . Using the inverse demand curves, show that consumer surplus in market i is CSi = Q2 i /(2bi ). (b) Let W = CS1(Q1) + CS2(Q2). Then iso-welfare contours are combinations of Q1 and Q2 that give the same level of W. Graph three iso-welfare contours in Q1, Q2 space. (c) Write the firm’s zero-profit constraint in terms of Q1 and Q2. Sketch the firm’s zero-profit constraint in Q1, Q2 space. (d) Using (b) and (c), graphically derive the quantities that maximize W subject to the firm breaking even.…
2. List the features that characterize a perfect competitive market. 3. What is a perfectly competitive market? Perfectly competitive markets establish capitalist justice and maximize utility in a way that respects buyers’ and sellers’ negative rights? Explain how and what types of negative rights are respected.
Assume that the resource market is purely competitive. If the price of the resource falls, other factors constant, then a firm that sells its product in a purely competitive market will Multiple Choice increase production by a larger amount than a firm with some monopoly power in its product market. increase production by a smaller amount than a firm with some monopoly power in its product market. decrease production by a larger amount than a firm with some monopoly power in its product market. decrease production by a smaller amount than a firm with some monopoly power in its product market.