LSC CUMBERLAND EC202 MICRO>PKG<
21st Edition
ISBN: 9781260586992
Author: McConnell
Publisher: MCG
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Question
Chapter 14, Problem 5RQ
To determine
The argument in favor of a more benign view of oligopolists.
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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])?
3. The following graph summarizes the demand and costs for a firm that operates in a monopolistically competitive market. (LOI,
LO3, LOS)
$220
210
200
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
MR
8 9 10 11 12 13 14 15 16
a. What is the firm's optimal output?
b. What is the firm's optimal price?
c. What are the firm's maximum profits?
d. What adjustments should the manager be anticipating?
ATC
22 23 24 25
Quantity
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…
Chapter 14 Solutions
LSC CUMBERLAND EC202 MICRO>PKG<
Ch. 14.2 - Prob. 1QQCh. 14.2 - The D2e segment of the demand curve D2eD1 in 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
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- penumy.edu LA0 u ten Que Complio St QUESTION 2Y MC 14 13 ATC MR 登 S8R Shce tm the above e is perng monopeicaly competve indutry in the long n we an expect o see Othe lypical fm's econom prolts expand as preduction hecomes more efficient Ohe lypal em praducng theimu po on ATC curve O mar mseterng the ndty un ecunomie profs ah empand share of the tet QUESTION 23 Suppese an indstry has utal sales f 25 millon per y The teo larpest fems have sales of $6 millen each the id largest fem has sales of 2 miion, and the fourth largest f has sales of S1 millon The rm conceation ratio for thin nduty O 30 percent O 1 percent O25 percent O 60 percent QUESTION 24 Suppose there are four frm in an industry The market shares of the four fems are 5 percent, 20 percent 35 percert, and 40 percent The Hurfindahi Hischan index tor that industry O 100 O6 650 O 1.250 O 3250 Chck Sane and Sulmit to ae and aulimit. Click Sate All Anaue to se all aencers Sa Aarrow_forwardQuestion 35 (Table: Three-Country Oil Production) Refer to the table. Suppose that three countries are engaged in oil production. For simplicity, assume zero costs so that revenue equals profit. Assume that country A cheats on the cartel agreement by producing 200 more barrels than the other two countries. What is the resultant profit earned by country A? Market Price 6,000 Total Market Output 600 800 1,000 1,200 1,400 1,600 1,800 O 24,000 O 30,000 O 70,000 90 80 70 60 50 40 30arrow_forward6. Consider a duopoly in which inverse demand is given by P= 100-Q, where Pis the price and Q is aggregate output. The marginal cost of each firm is initially equal to 55 and there are no fixed costs. The firms compete by simultaneously setting quantities. (a) What is the equilibrium quantity of each firm, the equilibrium price and the profit of each firm? Now assume that one of the firms, firm 1, develops a new technology that reduces its own marginal cost to 25. (b) If firm 1 keeps this innovation for itself (so that the marginal cost of firm 2 is still 55), what will be the new equilibrium levels of output, price and profits of the two firms? What is the consumer surplus in the market? Do consumers benefit from the innovation? (d) Finally, assume that firm 1 agrees to make its innovation available to firm 2 in return for an understanding that the two firms tacitly collude in the product market. In this case no royalty fees will be paid. Collusion will result in the monopoly price…arrow_forward
- 6. Consider a duopoly in which inverse demand is given by P= 100-Q, where Pis the price and Q is aggregate output. The marginal cost of each firm is initially equal to 55 and there are no fixed costs. The firms compete by simultaneously setting quantities. (a) What is the equilibrium quantity of each firm, the equilibrium price and the profit of each firm? Now assume that one of the firms, firm 1, develops a new technology that reduces its own marginal cost to 25. (b) If firm 1 keeps this innovation for itself (so that the marginal cost of firm 2 is still 55), what will be the new equilibrium levels of output, price and profits of the two firms? What is the consumer surplus in the market? Do consumers benefit from the innovation?arrow_forwardIf market share for six cleaning service companies are 8%, 10%, 6%, 3%, 25%, and 48%, what would be the Herfindahl-Herschman (HHI) index calculation? O 52 O 5008 O 523 O 3138arrow_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_forward
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