Economics: Principles & Policy
Economics: Principles & Policy
14th Edition
ISBN: 9781337912679
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning US
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Chapter 13, 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?
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?
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