EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 7IAPA
To determine
To explain:
The fair-fixing scheme which is a result of the equilibrium outcome of an oligopoly cartel game and the reason the cartel survived.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Question 5: Jimmy has a room that overlooks, from some distance, a major league baseball stadium. He decides to
rent a telescope for $50 a week and charge his friends and classmates to use it to peep at the game for 30 seconds. He
can act as a monopolist for renting out "peeps". For each person who takes a 30 second peep, it costs Jimmy $.20 to
clean the eyepiece. Jimmy believes he has the following demand for his service:
Price of
a Peep
$1.20
Quantity
of peeps demanded
1.00
90
100
150
200
250
300
70
60
50
350
40
30
400
450
20
10
500
550
a) For each price, calculate the total revenue from selling peeps and themarginal revenue per
peep.
Price
Quantity
TR
MR
$1.20
100
90
100
150
200
70
250
60
300
350
50
40
30
400
450
20
500
10
550
b) At what quantity will Jimmy's profit be maximized? What price will he charge? What will his total profit be?
c) Jimmy's landlady complains about all the visitors coming into the building and tells Jimmy to stop selling
peeps. Jimmy discovers, though, if he…
Justify if each of the following statements is TRUE or FALSE. If the statement is TRUE, just write “True”.
If the statement is FALSE, explain why it is wrong.
a) Pos Malaysia is the sole firm which provides courier services in Malaysia. It is considered a monopolist in Malaysia.
b) Sarawak Energy is the sole supplier of electricity transmission and distribution in Sarawak. It is a monopolist in Sarawak.
c) Shell Out is a seafood restaurant with many outlets in Selangor and Kuala Lumpur. It is doing business in the perfectly competitive market.
Price Discrimination:
You own a set of sports memorabilia that you could sell in Rochester and Minneapolis. You could sell them as a bundle or seperately in Rochester or Minneapolis. You know the WTP of your customers/collectors in both cities (see below for the WTP). You costs are $1000 for the Rochester memorabilia and $3000 for the Vikings memorabilia.
A. if arbitrage is NOT possible, what is the profit you sell the movies as a bundle versus as singles in both cities?
B. if arbitrage IS possible, what profit would you make if you sell them as a bundle in both cities?
WTP for Roch Mem.
WTP for vikings mem.
rochester
12,000
7000
minneapolis
4000
15,000
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
Knowledge Booster
Similar questions
- Homework(Ch 15) 4. Profit maximization and loss minimization BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit ATC 2.00 Loss 1.50 1.00 0.50 0 PRICE (Dollars per can) 0 MC 1.0 0.5 2.0 3.0 2.5 1.5 QUANTITY (Thousands of cans of beer) MR 3.5 D 4.0arrow_forwardDollars ✔ 5,000 0 MC D ATC AVC MR 50 Number of gold hula hoops Figure 10.4 Q Refer to Figure 10.4. The Exclusive Gift Company has a monopoly over the sale of gold hula hoops. This company is currently selling 50 gold hula hoops at a price of $5,000. You are hired as an economic consultant to this company. You should advise this monopolist to shut down in the short run and exit the industry in the long run. O produce in the short run but exit the industry in the long run if conditions do not change. produce in the short run and expand capacity in the long run. shut down in the short run but expand capacity in the long run if conditions do not change.arrow_forwardQuestion 6 of 18 BlueSky Airlines would like to price discriminate between their vacation and business travelers. Move the points on the rectangle to the area representing the maximized profits BlueSky earns from vacation travelers. Vacation travelers 600 550 Profits 500 450 400 350 300 250 200 150 Marginal cost = average cost 100 50 Vacation traveler demand MR 100 200 300 400 500 600 700 800 900 1,000 Quantity of trips Vacation traveler price per trip ($)arrow_forward
- Economics The inverse market demand for Hummers in NYC is p = 120 - 2Q. The cost of producing one Hummer is c= $40. The manufacturer licenses a single dealer to sell Hummers in NYC. 4. Therefore, the dealer acts as a monopoly in NYC in this market. The manufacturer sells each Hummer to the dealer for w (wholesale price). In addition, the manufacturer levies a fixed fee of f on the dealership. Consider a two-stage game in which in Stage 1 the Hummer manufacturer sets the per-unit price charged to the dealer w, and the fixed fee f. In Stage 2, the dealer determines the amount of Hummers to sell to maximize the dealership's profit. For parts (a) through (d), assume that f = 0. (a) Suppose the unit price the manufacturer charges the dealer w is given (determined in the first stage of the game). Compute the dealer's profit-maximizing sales of Hummers as a function of w. (b) Compute the manufacturer's profit-maximizing price w it charges the dealer for each Hummer sold. (c) Compute quantity…arrow_forwardConsider a market with a monopoly firm. Sales revenue of this firm is $10,340,000$10,340,000, total cost is $4,400,000$4,400,000, and average cost is $2.00$2.00. Another firm wants to enter the market and provide the same product at a lower price. To intimidate the potential competitor, the monopoly firm intends to use predatory pricing.By how much can this firm reduce the price of its product without losses? Enter your answer in the box below and round to two decimal places if necessary.arrow_forwardSean is a monopolist who operates a business rigging tablets to run twice as fast as the original specifications. If Sean charges $40, he would have 10 customers, but if he lowers the price to $37, he would have 11 customers. What is the marginal revenue of the 11th customer?arrow_forward
- Monopoly Facing inverse Demand P(Q) = 400 -10Q Monopoly Marginal cost = $10 Monopoly can price discriminate. Find the Quantity, Price, Profit, Consumer Surplus and deadweight loss. Draw Grapharrow_forwardUse the table to calculate the Herfindal-Hirschman Index for the U.S. auto market. Would the FTC approve a merger between GM and Ford?arrow_forwardA firm with monopoly power is engaging in price discrimination. The firm has two of customers. The two demand curves that the firm faces are: groups P-100 - 2Q P 80-4Q Marginal cost for the firm is constant at MC-4. The firm sets a price of $52 for the good, and issues a coupon for a lower price. What is the coupon set for? $4 off the original price $8 off the original price $6 off the original price $10 off the original price -04arrow_forward
- 5. Denton Cheese Company (DCC) makes a unique variety of cheese they call Eagle Cheese. They sell it as a monopoly, but a government agricultural support program will pay DCC $7.50 per pound for as much cheese as DCC wants to sell to the government. The market demand for Eagle Cheese is the following: P = 12-.003Q The cost of making the cheese is as follows: C = 2Q+.002Q² If the goal is profit maximization, how much cheese should DCC sell to the market and what price should they charge? Also, how much should they sell to the government?arrow_forwardPlease type your NUMERICAL answer in the space below. ENTER ONLY THE NUMBER. IF answers are in decimals, please round the number to one decimal point. Winterfell Cable TV pays $100,000 per year to earn exclusive rights to air a premium sports channel. There are two types of subscribers in Winterfell: 3,000 die-hard sports fans who will pay as much as $200 a year for the new channel and 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it. a) If Winterfell Cable is unable to price discriminate, what price will it charge and how much are its profits? Price Profits= b) If Winterfell Cable is able to price discriminate, how much will it make in profits? Profits= What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price c) discriminating policy? DWL=arrow_forwardBYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 Esc 3.50 + PRICE (Dollars per can) 3.00 + 2.50 78°F Sunny 2.00 1.50 1.00 + MC 0.50 + F1 1 F2 Ö- @ ATC F3 0+ # F4 F5 ▬ Monopoly Outcome 0 Profit COL F6 Loss O F7 1 F8 n F9 F10 F11 F12 2 Fn Lock ( 1 6/2 Insert Prt Scarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning