EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 13, Problem 10DQ
To determine
Why there is price collusion in an oligopoly.
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Ma3.
You operate in a duopoly in which you and a rival must simultaneously decide what price to charge for the same homogeneous product. Assume each you and your rival can choose a “low price” or a “high price”. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3 million. If you charge different prices, the one charging the high price loses $5 million and the one charging the low price makes $5 million.
What is the Nash equilibrium for the non-repeated version of this game?
Now suppose the game is infinitely repeated. If the interest rate is 10%, can you do better than you could in the non-repeated version of this game? If your answer is “yes”, provide the players’ strategies and any other conditions that must hold.
Question 2 [JP.14.3.19]
Consider a duopoly where the market demand is described by the equation: P = 150- Q. The marginal
cost for each firm is $60.
lo.] If the firms compete simultaneously with output, what is each firm's profit-maximizing output, the market
quantity, and the price each firm charges?
(b.) What is the economic profit eamed by each firm (from question [a]}
[c.) If Firm 1 is a leader in output, what is each firm's profit-maximizing output, the market quantity, and the
price each firm charges?
[d.] What is the economic profit earned by each firm (from question [c])?
The inverse demand for a homogenous-product Stackelberg duopoly is P = 10-Q where Q=Q1 + Q2.
The cost structure for the two firms, respectively, are C(Q1) = 4Q1 and C2(Q2) = 2Q2.
Suppose Firm 2 is the leader.
What is the equilibrium profit for the leader?
O 7.5
O 10.5
O 12.5
O 0.5
O 0.25
Chapter 13 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 13.1 - Prob. 1QQCh. 13.1 - Prob. 2QQCh. 13.1 - Prob. 3QQCh. 13.1 - Prob. 4QQCh. 13.4 - Prob. 1QQCh. 13.4 - The D2e segment of the demand curve D2eD1 graph...Ch. 13.4 - Prob. 3QQCh. 13.4 - Prob. 4QQCh. 13.A - Prob. 1ADQCh. 13.A - Prob. 2ADQ
Ch. 13.A - Prob. 3ADQCh. 13.A - Prob. 4ADQCh. 13.A - Prob. 1ARQCh. 13.A - Prob. 2ARQCh. 13.A - Prob. 3ARQCh. 13.A - Prob. 1APCh. 13.A - Prob. 2APCh. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQCh. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Prob. 13DQCh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3P
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