EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Question
Chapter 18, Problem 3MCQ
To determine
To choose:
The option that correctly explains the dilemma of oligopoly.
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Students have asked these similar questions
Which of the following would most likely create the setting for an Oligopoly ?
A.
The government grants T'Challa and Nakia a patent for their respective vibranium-based electric car batteries.
B.
Market Demand is two or more times less than the quantity needed to produce at the minimum of the Average Cost Curve.
C.
Market Demand is two or more times greater than the quantity needed to produce at the minimum of the Marginal Cost Curve.
D.
Insumountable technological difficulty associated with producing similar products serves as an effective Barrier to Entry.
E.
All of the Above
The table shows the demand schedule for a particular product.
Quantity
Price
0
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90
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80
900
70
1200
60
1500
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1800
40
2100
30
2400
20
2700
10
3000
0
Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market?
a. $40 b. $50 c. $60 d. $70 e. $80
a) Using the following graph state the price and quantity the firm will be at if the oligopoly
market is competitive and in long run equilibrium. Explain why the firm will be at that price and
quantity.
MC
ATC
1 E
10
20
30
40
50
60
70
80
Quantity
b) Using the same graph explain what the price and quantity would be if the market formed a
cartel. Explain the cartel and how it works, and why firms form them.
Price and Cost (dollars)
Chapter 18 Solutions
EBK FOUNDATIONS OF ECONOMICS
Ch. 18 - Prob. 1SPPACh. 18 - Prob. 2SPPACh. 18 - Prob. 3SPPACh. 18 - Prob. 4SPPACh. 18 - Prob. 5SPPACh. 18 - Prob. 6SPPACh. 18 - Prob. 7SPPACh. 18 - Prob. 8SPPACh. 18 - Prob. 1IAPACh. 18 - Prob. 2IAPA
Ch. 18 - Prob. 3IAPACh. 18 - Prob. 4IAPACh. 18 - Use this information to work Problems 5 to 7. DOJ...Ch. 18 - Use this information to work Problems 5 to 7. DOJ...Ch. 18 - Prob. 7IAPACh. 18 - Which of the following statements is incorrect. In...Ch. 18 - If firms in oligopoly form a cartel, it will...Ch. 18 - Prob. 3MCQCh. 18 - Prob. 4MCQCh. 18 - Prob. 5MCQCh. 18 - Prob. 6MCQCh. 18 - Prob. 7MCQ
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- An oligopoly takes into account the decisions made by other companies before lowering its price.. true or falsearrow_forwardWhich of the following apply to oligopoly industries? Select one or more answers from the choices shown. a. A few large producers. b. Many small producers. c. Strategic behavior. d. Price taking.arrow_forwarda. What evidence is there to indicate that the UK supermarket business is an oligopoly? What further evidence might you need to be more certain that this is the case? b. Comment on the suggestion that Tesco’s position as price leader is being undermined. c. Other than price cutting, analyse the ways in which the Big Four might restrict the growth of new entrants such as Aldi and Lidl. d. Discuss the extent to which the stores wars described above is in the best interests of the UK consumers. The supermarket business in the UK is dominated by the so-called ‘Big Four’. Their market shares in March 2014 are shown below:Tesco .................. 28%Asda ................... 19%Sainsburys .......... 18%Morrisons ........... 11%Other established supermarkets, notably the Co-operative and Waitrose, are way behind with market shares of 5–6%. Over the year to March 2014, Tesco and Morrisons have lost out whilst the other two have hung on to retain or marginally increase their market share.…arrow_forward
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- Which of the following is the primary reason an oligopoly is not a pure price maker? A. Dominant pricing strategy B. Product differentiation C. Dependent on pricing decisions of competitorsarrow_forwardConsider the curve in Figure, which shows the market demand, marginal cost, and marginal revenue curve for firms in an oligopolistic industry. In this example, we assume firms have zero fixed costs. a. Suppose the firms collude to form a cartel. What price will the cartel charge? What quantity will the carte supply? How much profit will the cartel earn? b. Suppose now that the cartel breaks up and the oligopolistic firms compete as vigorously as possible by cutting the price and increasing sales. What will be the industry quantity and price? What will be the collective profits of all firms in the industry? c. Compare the equilibrium price, quantity, and profit for the cartel and cutthroat competition outcomes.arrow_forwardDiscuss the possible deviations from perfect competition and then focus on oligopolies. How can cartels coordinate to affect markets? What affects antitrust enforcers’ ability to detect cartels? Discuss with reference to one or more examples.arrow_forward
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