Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 1.2CE
To determine
To describe:
The likely impact on the tactical competition.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
In 2004–2006, for the first time Boeing produced fewer planes than Airbus. If Boeing finds itself less profitable at 60 percent market share than at 45 percent, what is the likely impact on the Airbus-Boeing tactical competition?
Assuming Cournot-Nash market, fill in the table below when firm one has MC, = 10, firm two has MC2 = 20 and firm three has MC3 = 20. Additionally, there is no Fixed cost for none of the firms.Using data from the table below, explain the merger paradox when firms 2 and 3 merge. How the merged firm (firm 2 and 3) will be worse off?How would this outcome differ if all three firms merged?
Consider a duopoly where firms compete in prices and firms do not have any capacity constraints. Market demand is P(Q)=45-4Q, and each firm faces a marginal cost of $9 per unit. How much is each firm's total variable cost if firms equally divide the market at Nash equilibrium?
Chapter 13 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Knowledge Booster
Similar questions
- The figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. (a) At the initial equilibrium, what is total surplus (consumer surplus plus producer surplus)? Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (b) The price? (c) The output? (d) Total profit? (e) The resulting deadweight loss from River Company operating as a…arrow_forwardThe figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (b) The price?arrow_forwardThe figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (e) The resulting deadweight loss from River Company operating as a monopoly?arrow_forward
- The figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (c) The output? (d) Total profit?arrow_forwardAnswer the given question with a proper explanation and step-by-step solution. Two firms compete in a market to sell a homogeneous product with inverse demand function P = 400 – 2Q. Each firm produces at a constant marginal cost of $50 and has no fixed costs -- both firms have a cost function C(Q) = 50Q. If this market is defined as a Stackelberg Oligopoly, what is the optimal amount for the leader (firm 1) to produce? (Round to one decimal place) If this market is defined as a Stackelberg Oligopoly, what is the optimal amount for the follower (firm 2) to produce? (Round to one decimal place) What is the market price? (Round to the nearest whole number) What are the leader's (firm 1's) profits? (Round to the nearest whole number) What are the follower's (firm 2's) profits? (Round to the nearest whole number)arrow_forwardConsider the payoff matrix below representing two firms engaged in Bertrand Competition. Firm A is player 1 and Firm B is player 2. High price Low price High price 10, 12 -1, 13 Low price 12, 2 0, 3 What is Firm A's dominant strategy? Question 14Answer a. High price b. Low price c. Firm A does not have a dominant strategyarrow_forward
- Consider a Cournot oligopoly consisting of five identical firms producing good X. If the firms produce good X at a marginal cost of $7 per unit and the market elasticity of demand is −3, determine the profit-maximizing price. Multiple Choice $7 per unit $5.25 per unit $7.50 per unit $4.20 per unitarrow_forwardTwo airlines, Dragon Airline and Phoenix Airline, provide direct flight service to a city and tend to compete for the same group of travellers. They are contemplating changing their airfares to earn more profit. If both airlines raise their airfares, Dragon Airline will earn $800m while Phoenix Airline will earn $400m in profit. If both airlines reduce their airfares, Dragon Airline will earn $650m while Phoenix Airline will earn $550m in profit. If Dragon Airline raises its airfare while Phoenix Airline reduces its airfare, Dragon Airline will earn $200m while Phoenix Airline will earn $350m in profit. If Dragon Airline reduces its airfare while Phoenix Airline raises its airfare, Dragon Airline will earn $300m while Phoenix Airline will earn $250m in profit. Construct the payoff matrix in terms of profit for the two pricing strategies. Apply a game theory concept and solve this game using the Nash equilibrium method. Explain how you derive your answers and also whether this game is a…arrow_forwardTwo firms compete in a market to sell a standardized product and the inverse demand in the market is P = 400 – Q where Q = Q1 + Q2. The cost functions are: C1(Q1) = 8Q1 and C2(Q2) = 36Q2. If this market is characterized by a Stackelberg oligopoly, what is the optimal amount for the leader (firm 1) to produce?arrow_forward
- Consider an oligopoly with three firms that produce a homogeneous product. The market demand for the industry is Q = 120 - P. Market supply is determined by the output decisions of the firms. That is, Q = q1 + q2 + q3, where qi is the output of firm i. Each firm can produce at zero cost, and the firms behave non-cooperatively in deciding their output levels.A) Find the Cournot equilibria in this industry.B) What are the profits of each firm?C) Would (any) two firms have an incentive to merge, effectively converting the industry into a duopoly? (Justify your answer.)arrow_forwardSuppose that two Japanese companies, Hitachi and Toshiba, are the sole producers (i.e., duopolists) of a microprocessor chip used in a number of different brands of personal computers. Assume that total demand for the chips is fixed and that each firm charges the same price for the chips. Each firm’s market share and profits are a function of the magnitude of the promotional campaign used to promote its version of the chip. Also assume that only two strategies are available to each firm: a limited promotional campaign (budget) and an extensive promotional campaign (budget). If the two firms engage in a limited promotional campaign, each firm will earn a quarterly profit of $14 million. If the two firms undertake an extensive promotional campaign, each firm will earn a quarterly profit of $11 million. With this strategy combination, market share and total sales will be the same as for a limited promotional campaign, but promotional costs will be higher and hence profits will be lower.…arrow_forwardConsider a Cournot Oligopoly. One firm has costs C1(Q1) = 12Q1 while the other firm’s cost function is C2(Q2) = 10Q2. The demand for both firms’ products Q=Q1 +Q2 isQD(P)=200−2P. (a) Determine the equilibrium price P, the market shares s1, s2, and the quantities Q1, Q2 produced by both firms. (b) Suppose more firms with the lower cost technology, i.e., with cost function Ci(Qi) = 10Qi enter the market. How many firms with this technology must be in the market such that firm 1’s profit becomes negative. In other words, suppose there is one firm with the high costs, and n firms with the low costs. At what level n will profits of the high-cost firm be negative?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Survey of Economics (MindTap Course List)EconomicsISBN:9781305260948Author:Irvin B. TuckerPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning