Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 1RQ
To determine
Characteristics of the oligopoly.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of statement is true about economic profit in the long run.(LO2,3).
a) both the monopolistic and perfect competitor make one.
b) neither the monopolistic nor the perfect competitor makes one.
c) only the perfect competitor makes one.
d) only the monopolistic makes one.
11 21. Imagine an N firm oligopoly for "nominally differentiated" goods. That is, each of the N firms produces a product that "looks" different from the products of its competitors, but that "really" isn't any different. However, each firm is able to fool some of the buying public. Specifically, each of the N firms (which are identical and have zero marginal cost of production) has a captive market -consumers who will buy only from that firm. The demand generated by each of these captive markets is given by the demand function Pn A- Xn , where Xn is the amount supplied to this captive market and Pn is the price of the production of firm n. There is also a group of intelligent consumers who realize that the products are really undifferentiated. These…
14. Aside from advertising, how can monopolisticallycompetitive firms increase demand for their products?
17. Would you expect the kinked demand curve to bemore extreme (like a right angle) or less extreme (like anormal demand curve) if each firm in the cartel producesa near-identical product like OPEC and petroleum?What if each firm produces a somewhat differentproduct? Explain your reasoning.
Chapter 14 Solutions
Economics (Irwin Economics)
Ch. 14.2 - Prob. 1QQCh. 14.2 - The D2e segment of the demand curve D2eD1 graph...Ch. 14.2 - Prob. 3QQCh. 14.2 - Prob. 4QQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQ
Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3P
Knowledge Booster
Similar questions
- 10-3 Explain why predicting oligopoly behavior is so difficult6. (Price Leadership) Why might a price-leadership model of oligopoly not be an effective means of collusion in an oligopoly?arrow_forward9. Suppose Warner Music and Universal Music are in a duopoly and currently limit themselves to 10 new artists per year. One artist sells 2 million songs at $1.25 per song. However, each label is capable of signing 20 artists per year. If one label increases the number of artists to 20 and the other stays the same, the price per song drops to $0.75, and each artist sells 3 million songs. If both labels increase the number of artists to 20, the price per song drops to $0.30, and each artist sells 4 million songs. Explain how revenue payoffs for each scenario are calculated. If this game is played once, how many artists will each producer sign, and what will be the price of a song? If this game is played every year, how many artists will each producer sign, and what will be the price of a song?arrow_forward6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5) a. Determine the profit-maximizing output and price. b. What price and output would prevail if this firm’s product were sold by price-taking firms in a perfectly competitive market? c. Calculate the deadweight loss of this monopoly. 8. The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2. (LO8) a. Determine the firm’s optimal advertising-to-sales ratio. b. If the firm’s revenues are $40,000, what is its profit-maximizing level of advertising?arrow_forward
- Newfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.arrow_forwardUse the accompanying graph to answer the questions that follow. (LO1, LO2) a. Suppose this monopolist is unregulated. (1) What price will the firm charge to maximize its profits? (2) What is the level of consumer surplus at this price? b. Suppose the firm’s price is regulated at $80. (1) What is the firm’s marginal revenue if it produces 7 units? (2) If the firm is able to cover its variable costs at the regulated price, how much output will the firm produce in the short run to maximize its profits? (3) In the long run, how much output will this firm produce if the price remains regulated at $80?arrow_forwardTeletronics reported record profits of $100,000 last year and is on track to exceed those profits this year. Teletronics competes in a very competitive market where many of the firms are merging in an attempt to gain competitive advantages. Currently, the company’s top manager is compensated with a fixed salary that does not include any performance bonuses. Explain why this manager might nonetheless have a strong incentive to maximize the firm’s profits. (LO4, LO5)arrow_forward
- 4. You are the manager of a monopoly, and your demand and cost functions are given by P = 300 − 3Q and C(Q) = 1,500 + 2Q2, respectively. (LO3, LO4) a. What price–quantity combination maximizes your firm’s profits? b. Calculate the maximum profits. c. Is demand elastic, inelastic, or unit elastic at the profit-maximizing price–quantity combination? d. What price–quantity combination maximizes revenue? e. Calculate the maximum revenues. f. Is demand elastic, inelastic, or unit elastic at the revenue-maximizing price–quantity combination? 6. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. (LO1, LO3, LO5) a. Determine the profit-maximizing output and price. b. What price and output would prevail if this firm’s product were sold by price-taking firms in a perfectly competitive market? c. Calculate the deadweight loss of this monopoly. 8. The elasticity of demand for a firm’s product is –2.5 and its advertising elasticity of demand is 0.2.…arrow_forwardExplain what is Oligopoly and duopoly? Are firms in Oligopoly large firms or small firms? What is product differentiation, price discrimination and profit maximization under Oligopoly? Give two examples each of product differentiation and price discrimination. What is the optimum point of production and minimum cost point of a firm under Oligopoly? Explain and draw AR and MR curves as (a) kinked demand curve; (b) Collusion (cartels) and (c) Price leadership model.arrow_forward2) How does the corporate office create a parental advantage, which is difficult to duplicate by its more focused competitors? 3) What are the synergies and economies of scope and how do they work at Disney to lower its overall costs? 4) Given the diversification approach that Disney uses, what are some things that they can do to deal further with the trend toward cord-cutting and competition from large streaming and content producers such at Netflix, Amazon, and other content producers?arrow_forward
- What is the distinguishing characteristics of oligopoly in relation to the other forms of the other market organizations? What is its significance? In which sector of the USA economy is oligopoly most relevant?An oligopolistic firm from the telecommunication industry in USA follows demand-and-cost situation in 2009.Price in USD($) Quantity Total cost20 7 3619 8 4518 9 5417 10 6316 11 7215 12 81i. How much output should the oligopolistic produce? What price should it charge and what is the maximum profit can this firm earns?arrow_forward2. Describe the fundamental difference between pure competition and non-collusive oligopoly. 3. How do economies of scale and product differentiation (both desirable qualities) alter the nature of markets in the real world in negative ways? 4. What keeps oligopolistic industries from abusing the market power they hold, forming into collusive cartels, or merging into dominant monopolies? 5. What does society do to undermine the macroeconomic impacts of the chaotic nature of continuous product differentiation by monopolistically competitive firms? 6. If these two market types, monopolistic competition and non-collusive oligopoly, not pure competition, make up 90% of the market reality that we live in what lesson is to be learned?arrow_forward7. You are the manager of a monopolistically competitive firm, and your demand and costfunctions are given by Q = 36 − 4P and C(Q) = 4 + 4Q + Q2. (LO1, LO3, LO5)a. Find the inverse demand function for your firm’s product.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax