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- Albert and Johny are the only sellers of Motorbikes in Ireland. The inverse market demand function for motorbikes is P(Y)= 200- 2Y . Both firms have the same total cost function: T(C)= 12Y and the same marginal cost: M(C)=12. Suppose now that the two firms decide to act like a single monopolist. What will the total quantity of Motorbikes sold in the market be and what will the equilibrium price be? Represent the profit maximisation problem on a graph and indicate the price and quantity at the equilibrium. Calculate the total profit made by the two firms when they act like a monopoly. Compare it with the total profit they were making in the Stackelberg oligopoly. For the two firms to be willing to agree to act as a monopoly, how should they split the quantity to produce between them? We assume that if they do not agree to act like a monopoly, then the market structure is the Stackelberg oligopoly studied above. We further assume that no money transfer is possible between the two…Currently there is an incumbent monopoly in a market. Next year, a potential entrant may enter the market. Suppose that the potential entrant first makes a decision to either ‘enter’ or ‘not enter’ the market. If the potential entrant chooses ‘enter’, then the incumbent can choose to either ‘lobby’ or ‘not lobby’ the government to impose a tax on the potential entrant. If the incumbent chooses to ‘lobby’ then this imposes a cost on it of 20 dollars, but as a result, the government passes a law that places a tax of 60 dollars on the potential entrant if it chooses to enter the market. If the potential entrant chooses to not enter the market it makes zero profit, and the incumbent firm makes the monopoly profit equal to 100 dollars. If the potential entrant enters the market and the incumbent chooses not to lobby, then both firms earns the duopoly profit of 50 dollars. If the potential entrant enters the market, and the incumbent chooses to lobby, the potential entrant earns the…Currently there is an incumbent monopoly in a market. Next year, a potential entrant may enter the market. Suppose that the potential entrant first makes a decision to either ‘enter’ or ‘not enter’ the market. If the potential entrant chooses ‘enter’, then the incumbent can choose to either ‘lobby’ or ‘not lobby’ the government to impose a tax on the potential entrant. If the incumbent chooses to ‘lobby’ then this imposes a cost on it of 20 dollars, but as a result, the government passes a law that places a tax of 60 dollars on the potential entrant if it chooses to enter the market. If the potential entrant chooses to not enter the market it makes zero profit, and the incumbent firm makes the monopoly profit equal to 100 dollars. If the potential entrant enters the market and the incumbent chooses not to lobby, then both firms earns the duopoly profit of 50 dollars. If the potential entrant enters the market, and the incumbent chooses to lobby, the potential entrant earns the…
- A firm sells some output in a perfectly competitive market, where the price is $60 per unit, and some on a market in which it has a monopoly, with a demand function p2= 100 - q2, where q2 is output in the monopoly market. Its total-cost function is C= (q1+q2)^2, where q1 is output in the competitive market. Find the profit maximizing outputs in the two markets and discuss the nature of the equilibrium. Suppose now that the price in the competitive market falls to $10. Find the new profit-maximizing solution, and discuss how it compares with the original.As a manager of a music venue (assume a monopoly market), you have noticed much higher demand on weekends than during the week. You therefore conducted a study that has revealed two different demand curves at your theater. On weekends, the inverse demand function is P = 24 − 0.0005Q; on weekdays, it is P = 20 − 0.0025Q. Each night you hire an act to play costs about $75,000 for the band, and about $5.00 per person (staff, food, drinks). Devise a pricing strategy to maximize your firm's profits.Two firms, Incumbent & Entrant, can produce the same good. The market demand for the good is given by P = 180 – Q, where P is the market price and Q is the market quantity demanded. The firms must pay w = 45 per unit of output for labour and r = 45 per unit of output for capital (one unit of capital is used per unit of output), but Incumbent may choose capacity KI units of capital before Entrant decides whether to enter the market. Suppose firms each have fixed costs FI =600, FE=500. Incumbent chooses (as a Stackelberg leader) capacity KI equal to the monopoly profit- maximizing quantity. When you answer the following questions, show your work. a. Would Incumbent be able to prevent entry by choosing capacity KI equal to the monopoly profit-maximizing quantity? Explain. b. What is the Incumbent’s equilibrium choice of capacity KI in this Dixit game? c. Does the Incumbent’s choice of capacity KI in part (b) qualify as predatory conduct (here, limit output)? Explain.
- A small monopoly manufacturer of widgets has a constant marginal cost of $20. The demand for this firm's widgets is Q=105−1P. Part 2 Given the above information, compute the social cost of this firm's monopoly power. The social cost is $enter your response here. (Round your response to the nearest penny.)Consider the welfare effects when the industry operates under a competitive market versus a monopoly. On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a monopoly controls a market because the resulting equilibrium is different from the competitive outcome, which is efficient. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Price Quantity (Dollars) (Hot dogs) Competitive Monopoly Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a_______________, and the…
