Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 12, Problem 4DQ
To determine
The difference in the price of the product in the oligopoly market.
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Suppose there are only two automobile companies,Ford and Chevrolet. Ford believes that Chevrolet will match any price it sets, but Chevrolet too is interested in maximizing profit. Use the following price and profit data to answer the following questions. a. What price will Ford charge?b. What price will Chevrolet charge once Ford has set its price?c. What is Ford’s profit after Chevrolet’s response?d. If the two firms collaborated to maximize joint profits, whatprices would they set?e. Given your answer to part (d), how could undetected cheatingon price cause the cheating firm’s profit to rise?
How many real industries can you name that are oligopolies? How many operate under monopolistic competition? Perfect competition? Which of these is most difficult to find in reality? Why do you think this is so?
Give an example of each type of offer:-Polypolic offer
-Oligopoly offer
-Monopoly offer
Chapter 12 Solutions
Economics: Principles and Policy (MindTap Course List)
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- Some politicians (and others) have suggested that the largest U.S. tech firms have monopolies and need to be broken up. Comment on what such breakup(s) would do to the industry that these firms are competing in. For example, the intensity of rivalry would increase, but what else would happen to the industry? How could breaking up their industry be good for industry incumbents, i.e., those companies in the industry that’s being broken up?arrow_forwardIn your experience and observation of the general market, can you identify two companies locally or nationally you can associate with any of these market structures (Perfect competition market structure, monopoly market structure, monopolistic-competition market structure, oligopoly market structure)? not copy pastearrow_forwardBusiness journalists frequently write that the financial markets expect that firms that possess market power (e.g., firms that have prominent brand names) will raise their prices on a regular (e.g., annual) basis. Is this a correct characterization of the pricing behavior of firms with market power (e.g., firms that are monopolies)?arrow_forward
- 2/2 100% + 3. You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If not, what should it do to increase profit? If the firm is maximizing profit, is the market in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? a. P ATC b. P> MC, P ATC d. P> MC, P = ATC I.arrow_forwardQ 03: How do oligopolies works? Give one example of each? How is the market structure different on the base of brand loyalty and price value?arrow_forwardChoose a market for a good that you use often in real life and explain whether the market is perfect competition, monopoly, monopolistic competition, or oligopoly using the definition of the four different market structures. Please provide explanationsarrow_forward
- Question 2 Back in the 1950s, General Motors (GM) was at its peak. It was widely viewed as a shining example of how a large company should be managed, and controlled three quarters of the US car market. As at 2020, GM remains the biggest automaker by sales in the US, but it controls less than 20% of the market. For consumers, this level of competition has been wonderful; the level of choice when it comes to buying and leasing. For GM, as well as other large carmakers, having to operate in this realm isn't always fun, but if pressed they'll admit that there's something distinctly American about the market being hyper-competitive — and they might even acknowledge that having Germans and Japanese brands to do battle against helps them to improve their own capabilities. i. State what market structure existed in the automobile industry in the US in the 1950s. Illustrate and explain how equilibrium is determined. ii. Can excess profit be earned in this industry in the long run. Explain.…arrow_forwardQuestion 2 Back in the 1950s, General Motors (GM) was at its peak. It was widely viewed as a shining example of how a large company should be managed, and controlled three quarters of the US car market. As at 2020, GM remains the biggest automaker by sales in the US, but it controls less than 20% of the market. For consumers, this level of competition has been wonderful; the level of choice when it comes to buying and leasing. For GM, as well as other large carmakers, having to operate in this realm isn't always fun, but if pressed they'll admit that there's something distinctly American about the market being hyper-competitive — and they might even acknowledge that having Germans and Japanese brands to do battle against helps them to improve their own capabilities. i. Illustrate how equilibrium is determined. NO HANDWRITING PLEASE. I HAVE A HARD TIME UNDERSTANDING.arrow_forwardFirm Verizon ATT Sprint T-Mobile All others Market Share (%) 10 8 7 5 1 a. What is the approximate Herfindahl index? Instructions: Round your answer to the nearest whole number. b. Based on this Herfindahl index calculation, how would you describe its market structure? Monopolistic competition Oligopoly C. What is the four-firm concentration ratio? Instructions: Round your answer to to one decimal place.arrow_forward
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