Why is price fixing (collusion) among firms so bad? Give an example using a case, highlighting what happened, how it was discovered, and the remedies that were applied by the court.
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- What is a tie-in sale? How might it reduce competition and when might it be acceptable?Classify the following as a government-enforced barrier to entry, a banker to entry that is not government-enforced, or a situation that does not involve a barrier to entry. A patented invention A popular but easily copied restaurant recipe An industry where economies of scale are very small compared to the size of demand in the market A well-established reputation for slashing prices in response to new entry A well-respected brand name that has been carefully built up over many yearsWhen 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.
- Is a monopolist a price taker? Explain briefly.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?Firms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?
- The Competition Commission of Mauritius has been dealing with a number of cases of allegedexploitative monopoly behavior by firms in Mauritius. On the basis of relevant cases, analyse the viewthat although monopolies can be good, yet governments need to regulate them as they can often beevilish and they can affect the interest of consumers.Q. A woman complained to “Dear Abby” that a laundry charged $1.25 each to launder and press her husband’s shirts, but for her shirts—the same description, only smaller—the laundry charged $3.50. When asked why, the owner said, “Women’s blouses cost more.” Abby suggested sending all the shirts in one bundle and enclosing a note saying, “There are no blouses here—these are all shirts.” a. Is the laundry practicing price discrimination, or is there really a $2.25 difference in cost? b. Assuming the laundry is engaging in price discrimination, why do men pay the lower price and women the higher? c. Could the laundry continue to separate markets if people followed Abby’s advice? What about the policing costs associated with separating the markets?a. Give two examples of price discrimination. In each case, explain why the monopolist chooses to follow this business strategy. b. Both antitrust policy and industrial regulation deal with monopoly. What distinguishes the two approaches? How does government decide to use one form of remedy rather than the other? c. How does social regulation differ from industrial regulation? What types of benefits and costs are associated with social regulation?
- a. The perfectly competitive firm exhibits resource allocative efficiency (P = MC), but the single-price monopolist does not. What is the reason for this difference?b. Explain three reasons why monopolies arise. c. Why is the marginal revenue of a perfectly competitive firm equal to the market price? d. Would a perfectly competitive firm produce if price were less than theminimum level of average variable cost? Why?a. Apple faces competition from many other firms in the world market for mobile phones; therefore, Apple cannot have market power. Do you agree with this statement? Explain why. b. The marginal revenue for a perfectly competitive firm is equal to the market price. Why is this not the case for a monopolist?Only typed answer Assume that the demand for a standard (i.e. non-luxury seat) ticket to a Cleveland Indians game is represented by the function: P = 80 – 0.625Q and MR = 80 – 1.25Q and MC = 30 a. What single price will maximize monopoly profit? b. What will be the prices and quantity under two-part pricing? c. Calculate and compare the profits for each option.
