What will firms often do if they find a strong complementary relationship between two products? a. They will usually concentrate on the larger market and largely ignore the smaller market b. They will usually avoid getting involved in the complement market for fear of an antitrust case c. They will usually get rid of their interests in the complement market in order to avoid a conflict of interest d. They will try to form a cartel with complement producers to raise the price of the complement e. They will often produce the product in order to reduce its price What sign will the cross elasticity for a complement have? a. Positive b. Negative C. Zero d. Sign does matter

What will firms often do if they find a strong complementary relationship between two products? a. They will usually concentrate on the larger market and largely ignore the smaller market b. They will usually avoid getting involved in the complement market for fear of an antitrust case c. They will usually get rid of their interests in the complement market in order to avoid a conflict of interest d. They will try to form a cartel with complement producers to raise the price of the complement e. They will often produce the product in order to reduce its price What sign will the cross elasticity for a complement have? a. Positive b. Negative C. Zero d. Sign does matter

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 18CTQ: When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that...

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When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term-that the incentives for individual members. to cheat would become too strong. More than fort),r years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? Hint: You may wish to consider non-economic reasons.
Two firms dominate the market for surgical sutures and competeaggressively with respect to research and development. The followingpayoff table depicts the profit implications of their different R&Dstrategies.a. Suppose that no communication is possible between the firms; eachmust choose its R&D strategy independently of the other. Whatactions will the firms take, and what is the outcome?b. If the firms can communicate before setting their R&D strategies,what outcome will occur? Explain.Firm B’s R&D SpendingLow Medium HighLow 8, 11 6, 12 5, 14Firm A’s R&D Medium 12, 9 8, 10 6, 8 SpendingHigh 11, 6 10, 8 4, 6
2. Four firms (A, B, C, and D) play a pricing game (i.e. Bertrand). Each firm (i) may choose any price Pi from 0 to ¥, with the goal of maximizing its own profit. Firms A and B have MC = 10, while firms C and D have MC = 20. The firms serve a market with the demand curve Q = 100 – P. All firms produce exactly the same product, so consumers purchase only from the firm with the lowest price. If multiple firms have the same low price, consumers divide their quantities evenly among the low-priced firms. Assume the firms choose price simultaneously. a. There are many equilibria in this simultaneous-move pricing game. Provide one equilibrium combination of prices, and argue that no firm has a unilateral incentive to deviate from these prices. Now assume firm A chooses price first. Firm B observes this choice and then chooses its own price second. Firm C chooses price third, and firm D chooses price last. b. Again, there are many equilibria in this sequential-move pricing game.…
There is much evidence that large firms with considerable market power (firms such asmonopolies) may not maximize profits but may pursue quite different objectives such asgrowth or sales revenue maximization. What are the arguments put forward to defendmonopoly? Name any 5 Generally, the aim of a business is to maximize profit. Which point should a firm operateat in order to achieve maximum profit? By making use of a graph indicate clearly the pointat which a firm makes maximum profit and a point where a firm increase their output inorder to enhance profit as well as well as the points where they should reduce theirproduction if they want to enhance profit
K DOJ and FTC use the Hertindahl-Hirschman Index as a measure of concentration. How is this calculated? By O A. adding up the market shares of all firms in the industry, squaring this number and then dividing by the number of firms in the industry. OB. determining the market shares of the four largest firms in the industry, but unlike the concentration ratio, the Index includes sales in the United States by foreig OC. squaring the four - firm concentration ratio of the industry and dividing this number by the total number of firms in the industry. D. squaring the market shares of each firm in an industry and then adding up the values of the squares.
Suppose that the market for e-readers is an oligopoly controlled by Amazon.com , Barnes and Noble,Sony, and Apple. Barnes and Noble is consideringincreasing its output. How would this affect themarket price? How would it affect the profits ofeach company?
Suppose a country's mobile phone industry is supplied by only two firms (i.e. an oligopoly). Explain how the presence of two firms affects the price elasticity of demand of each firm's output.
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There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete
Please no written by hand solution Considerthe following problem. There are five firms producing a homogenous good and competing in quantities simultaneously. The demand function for this good is given by D(p) = 100−p, where p denotes price. The marginal cost is the same for all firms and equals 40 Answer the following questions. (a) Compute the equilibrium quantities and profits of each firm. (b) Now suppose that two of these firms (say firms 1 and 2) want to merge. (The remaining firms stay unchanged.) Merging, however, is costly. To merge, each merging firm has to pay a fixed cost F. Determine the highest fixed cost F that the two firms would be willing to pay in order to proceed with the merger.
Please solve D and E part only. Thankyou. Consider three firms, each with cost function C(qi)=4qi, currently competing Cournot. Market demand is P = 20 – Q. a. a. Find the quantities, price, and profits of each firm in equilibrium. b. Imagine firms1 and 2 merged to become one, so after the merger there are now two firms left in the market, firm 1&2 and firm 3. Assume there are no cost efficiencies expected and assume that the two firms play Cournot as before. Find the quantities, price, and profits of each firm in equilibrium c. Was it profitable for firms 1 and 2 to merge in the first place? d. Continuing with b., imagine that firms did not play Cournot after the merger, but rather that the merged firm 1&2 became a Stackelberg leader after the merger and firm 3 became the Stackelberg follower. If this were the case, find the quantities, price, and profits of each firm in equilibrium. e. Was it profitable for firms 1 and 2 to merge in the first place? Did price…