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With examples, examine the barriers to business entry for imperfect
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- Does a monopolistic competitor produce too much or too little output compared to the most efficientlevel ? What practical considerations make it difficult for policymakers to solve this problem?A decorator, who is a monopolist, makes two types of specialty picture frames. From experience, the decorator has determined that if x frames of the first type and y frames of the second type are made and put on sale in a showroom, they can be sold for (100 - 2x) dollars and (120 - 3y) dollars each, respectively. The total cost of constructing these frames is (12x + 12y + 4xy) dollars. How many frames of each type should be produced to realize the maximum profit. and what is the maximum profit? Make sure to verify that this is indeed a maximum.Discuss the forms of barriers to entry in the pharmaceutical industry.
- Construct a numerical example based on a linear demand function and two firms with identical, constant marginal costs. a) Use your model to show that, a Cournot duopolist can "do better" by producing the monopoly output, under the assumption that its competitor reacts and adjusts its output optimally. b) How does this result compare to what the Stackelberg model predicted?The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is: P = 8 - 0.005Qd where P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output. a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw? b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh? c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…Cournot’s Model of Duopoly) Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd=5500-25P, where P is the price of a cubic metre of concrete and Qd is the number of cubic metres demanded every year. The marginal cost is $40 per cubic metre. Competition in this market is described by the Cournot model. (a)Given Rebecca’s output is 2000, what is Joe’s residual demand function? What is Joe's output so he maximizes his profit? (b)If Rebecca’s output is qR, what is Joe’s best response function? (c)If Joe’s output is qj, what is Rebecca’s best response function? (d)Plot both Joe and Rebecca’s best response functions on one graph, where the the horizontal axis represents Rebecca’s output qR and the vertical axis represents Joe's output qR. (e)What is the meaning of the interception of the two best response functions?
- Which is the correct statement? A natural monopoly implies that: a. Economies of scale are of little importanceb. Marginal cost pricing will always yield positive profitsc. Pareto optimal pricing may bring lossesd. Private ownership is the only tenable solutionRefer 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?Consider a duopoly with a leader (called L) and a follower (called F). The market demand is given as: P=500-0.25Q, where Q=QL+QF The total cost function for the leader is given as: TCL=0.03QL The total cost function for the follower is given as: TCF=0.1QF All variables are per day, per plant. What is the profit-maximizing quantity for the leader (per day, per plant)? (Note: Round your answer to two decimal points
- Q21 Answer the question on the basis of the provided demand and cost data for Aphria, a monopolist producing marijuana. Demand Data for Marijuana Cost Data for Marijuana Price Quantity Demanded Output Total Cost $6.25 3 3 $5.00 6.00 4 4 6.00 5.75 5 5 6.50 5.25 6 6 7.50 4.50 7 7 9.00 4.00 8 8 11.00 3.50 9 9 14.00 The profit-maximizing level of output for Aphria will be Multiple Choice 4 units. 7 units. 5 units. $10. 6 units.“The social desirability of any particular firm should be judged not on the basis of its market share but on the basis of its conduct and performance.” Make a counterargument, referring to the monopoly model in your statement.The supply chain for Pappy Van Winkle bourbon is characterized by a monopolist upstream producer and a competitive downstream retail sector. Final consumers’ demand for Pappy Van Winkle bourbon is given as: P=140-2Q, where Q is the number of bottles that are purchased each day. The marginal cost of production (i.e., performing the manufacturing function) can be written as: MCM=30+2Q, and the marginal cost of performing the retail function is MCA=20. Suppose that the two firms are not vertically integrated. Construct the final consumers’ demand curve.
