Refer to the diagram for a non-collusive oligopolist. We assume that the firm is in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output? $| D1MR,MRD2MR2MR1QuantityRefer to the diagram for a non-collusive oligopolist. We assume that the firm is initially inequilibrium at point E, where the equilibrium price and quantity are Pand Q. If the firm'srivals will ignore any price increase but match any price reduction, over what range mightmarginal cost rise without disturbing equilibrium price and output?Dollars

Oligopoly is a type of market structure.

Refer to the diagram for a non-collusive oligopolist. We assume that the firm is in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?

Refer to the diagram for a non-collusive oligopolist. We assume that the firm is in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, over what range might marginal cost rise without disturbing equilibrium price and output?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

See similar textbooks

Similar questions

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;…
Consider any market that has a demand curve given by: Qd = 125 - 0.4P. Being the total quantity demanded in the market, given the quantity in millions of units and the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market that have Cmg = CVme = 2. About this market, the question is: a) What is the reaction curvature of the oligopolists? b) What will be the production of each of the companies? c) What is the sale price for oligopolists?
Consider any market that has a demand curve given by: Qd = 240 - 2P. Where Qd is the total quantity demanded in the market, given in millions of units and P is the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market with Cmg = CVme = 15 and fixed monthly costs equal to 1,400. About this market, ask yourself: a) What is the reaction curve of oligopolists? b) What will be the production of each of the companies? c) What is the selling price practiced by oligopolists? d) What is the profit of each of the oligopolists? e) Imagine that one of the companies managed to implement a process innovation capable of halving its Cmg and CVme, so that they would go from 15 to 7.5. This investment implies an additional monthly expense of $1,800. Discuss the statement: "If this situation occurs, the innovative company will not implement variable cost reduction, as the quantity supplied in the market will increase very little; prices will…
(Market Entry Deterrence): NSG is considering entry into the local phone market inthe Bay Area. The incumbent S&P, predicts that a price war will result if NSG enters. If NSG staysout, S&P earns monopoly profits valued at $10 million (net present value, or NPV of profits),while NSG earns zero. If NSG enters, it must incur irreversible entry costs of $2 million. If there isa price war, each firm earns $1 million (NPV). S&P always has the option of accommodatingentry (i.e., not starting a price war). In such a case, both firms earn $4 million (NPV). Supposethat the timing is such that NSG first has to choose whether or not to enter the market. ThenS&P decides whether to “accommodate entry” or “engage in a price war.”a. Model this as a dynamic game and draw the game tree.b. What is the subgame perfect Nash equilibrium outcome to this sequential game?
Consider any market that has a demand curve given by: Qd = 240 - 2P. Where Qd is the total quantity demanded in the market, given in millions of units and P is the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market with Cmg = CVme = 15 and fixed monthly costs equal to 1,400. About this market, ask yourself: a) What is the profit of each of the oligopolists? b) Imagine that one of the companies managed to implement a process innovation capable of halving its Cmg and CVme, so that they would go from 15 to 7.5. This investment implies an additional monthly expense of $1,800. Discuss the statement: "If this situation occurs, the innovative company will not implement variable cost reduction, as the quantity supplied in the market will increase very little; prices will remain very close to what they are today and its profits will not increase"
A market analysis employed by the “Sad Student Company” reveals that the number oflots of the game named “Handsome Killer: Revenge of the Teacher” ordered by thewholesalers when the game is offered at a price of dollars per lot is given by the formula:p=1500-2.5qa) Find the company’s total, marginal and average revenues b) Find the price and quantity maximizing the total revenue by first expressing therevenue as a function of price rather than of quantity
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 monopoly market has a demand function in whichquantity demanded depends not only on market price (P) butalso on the amount of advertising the firm does (A, measuredin dollars). The specific form of this function isQ =(20 - P2) (1 + 0.1A - 0.01A2).The monopolistic firm’s cost function is given byC = 10Q + 15 + A.a. Suppose there is no advertising (A = 0). What outputwill the profit-maximizing firm choose? What market price will this yield? What will be the monopoly’sprofits?b. Now let the firm also choose its optimal level of advertising expenditure. In this situation, what output levelwill be chosen? What price will this yield? What will thelevel of advertising be? What are the firm’s profits in thiscase? Hint: This can be worked out most easily by assuming the monopoly chooses the profit-maximizing pricerather than quantity.
Exercise A.3 Compare the competitive equilibrium with that of the first-degree price discriminating monopolist. Indicate the similarities and differences that exist in prices, quantities produced, consumer surplus and loss of efficiency between both situations. Represent graphically assuming that the marginal cost is constant
Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1. a. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.b. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.c. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.
9.17. Number of competitors. Consider an n firm homogeneous-good oligopoly with constant marginal cost, the same for all firms. Let d ̄ be the minimum value of the dis- count factor such that it is possible to sustain monopoly prices in a collusive agreement. Show that d ̄ is decreasing in n. Interpret the result.
Consider a mature maket with a demand given by P=105.4-10Q The cost of production is given by C=10Q For many years this market has been served by a monopolist. How much profit would the firm lose if it is forced to behave as a competitive firm In all your calculations use numbers with 4 decimal places.