Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 10, Problem 17CTQ
Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each film in the cartel produces a near-identical product Like OPEC and petroleum? What if each film produces a somewhat different product? Explain your reasoning.
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Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product?
Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like petroleum? What if each firm produces a somewhat different product? Explain.
Why has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization?
Chapter 10 Solutions
Principles of Economics 2e
Ch. 10 - Suppose that, due to a successful advertising...Ch. 10 - Continuing with the scenario in question 1, in the...Ch. 10 - Consider the curve in the figure below, which...Ch. 10 - Sometimes oligopolies in the same industry are...Ch. 10 - What is the relationship between product...Ch. 10 - How is the perceived demand curve for a...Ch. 10 - How does a monopolistic competitor choose its...Ch. 10 - How can a monopolistic competitor tell whether the...Ch. 10 - If the firms in a monopolistically competitive...Ch. 10 - Is a monopolistically competitive firm...
Ch. 10 - Will the firms in an oligopoly act more like a...Ch. 10 - Does each individual in a prisoners dilemma...Ch. 10 - What stops oligopolists from acting together as a...Ch. 10 - Aside from advertising, how can monopolistically...Ch. 10 - Make a case for why monopolistically competitive...Ch. 10 - Would you rather have efficiency or variety? That...Ch. 10 - Would you expect the kinked demand curve to be...Ch. 10 - When OPEC raised the price of oil dramatically in...Ch. 10 - Andreas Day Spa began to offer a relaxing...Ch. 10 - May and Raj me the only two growers who provide...Ch. 10 - Jane and Bill are apprehended for a bank robbery....
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- assuming that you own one of three gas stations in a little town and you and the other gas station owners decide you want to "help each other out" so everyone can make more money." What arrangements could you make so that all three owners make more money? Would these arrangements make the three gas stations a cartel?arrow_forwardOne of the most famous cartels of the past 50 years is OPEC, the Organization of Petroleum Exporting Countries. The members of OPEC are countries rather than individual businesses. Oil Ministers from each of the countries meet regularly to establish how much each oil each country will produce each month (the amount each country agrees to produce is called its quota). Saudi Arabia is the largest oil-producing country in OPEC. Why does Saudi Arabia usually produce less than its quota each month?arrow_forwardThe demand for a product is Q = 100 P. Initially the marginal cost is MC0 = 40 and the price is P0 = 40. (a) What is the total surplus and If a cartel forms, the price rises to P1 = 70, and the marginal cost stays the same at MC1 = 40. What is the total surplus with a cartel? (b) If a merger happens, the price would become P2 = 70 and the marginal cost would become MC2 = 30. What is the total surplus after the merger? (c) Consider again the merger. Keeping all the others parameters fifixed, for what values of P2 should the merger be allowed? (Your can say something like “the merger should be allowed if P2 is more than 50”, or “the merger should be allowed if P2 is less than 50”.)arrow_forward
- In order to be successful, a cartel must find a way to encourage members to produce more than they would otherwise produce. agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. agree on the total level of production and on the amount produced by each member. agree on the prices charged by each member, but they need not agree on amounts produced.arrow_forwardThe graph below shows the demand for Cosmic shampoo. ◻ Suppose there are no fixed costs and marginal cost is a constant $30. a. What are the perfectly competitive price and output? Price: $ Output: b. What are the cartel (monopoly) price and output? Price: $ Output: c. If there are only four firms in the cartel, what are the price and output of each firm, assuming equal shares? Round your answers to 1 decimal place. Price: $ Output: Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardWhich of the following is likely to hurt the success of a cartel? - the market demand faced by the cartel is somewhat inelastic - cartel members have cost advantages over non-cartel members in the same market - cartel supplies all (or nearly all) of the market's output of the good or service - cartel members expect to interact for a short period of timearrow_forward
- What problems usually make cartels collapse? How was OPEC able to avoid this fate, at least through the mid-1980s?arrow_forwardConsider an industry that consists of 4 firms, all competing over the same market, given by the following demand equation: P=80-3Q All firms have the same Total Cost Function, given by: TC₁=10q,+2q Suppose the firms decide to collude and voluntarily restrict output and raise price, in order to increase profits. a) What price will be charged by the members of the cartel? Assume the head of the cartel is fair and distributes output q, equally among the 4 firms (since they have identical costs). b)What is the output of each individual firm? c) What is each individual firm's profit? We know that there is a built-in incentive for cartel members to cheat on the cartel. If, as a result, the cartel breaks down: d) What price will be charged in the market? e) Assuming each firm captures an equal share of the market, what now is each firm's output, q? f) What now is individual firm profit? g) Illustrate your answerarrow_forwardA certain rural village has numerous small farms which raise livestock. There are two large and equally sized landowners, Jimmy and Bob, which produce hay for the farmers’ animals. Below is the daily village demand for hay Suppose, for simplicity, that Jimmy and Bob have the same constant cost structure, so maximizing total revenue maximizes profit. If Jimmy and Bob initially form a cartel, but subsequently succumb to the temptation to cheat on each other, what will be the Nash equilibrium? Jimmy and Bob will each earn a daily profit of $625. Jimmy will earn a daily profit of $700 and Bob will earn a daily profit of $500. Bob will earn a daily profit of $700 and Jimmy will earn a daily profit of $500. Jimmy and Bob will each earn a daily profit of $525.arrow_forward
- Is it possible that the violent members of the drug cartels can behave like cartels in legitimate markets?arrow_forwardOPEC is a petroleum cartel, a group of oil producing countries whose objective is to coordinate and unify petroleum policies. What type of market structure is a cartel?arrow_forwardThe graph below shows the demand for Cosmic shampoo. Suppose there are no fixed costs and marginal cost is a constant $80.a. What are the perfectly competitive price and output? Price: $ Output: b. What are the cartel (monopoly) price and output? Price: $ Output: c. If there are only four firms in the cartel, what are the price and output of each firm, assuming equal shares? Round your answers to 1 decimal place. Price: $ Output:arrow_forward
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