ECONOMICS - UPDATED
20th Edition
ISBN: 9781259795862
Author: McConnell
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
expand_more
expand_more
format_list_bulleted
Question
Chapter 21, Problem 5DQ
To determine
Economies of scale and merger of firms.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Question 1.Assume there are only two art auction companies who account for 100% of all the sales of 19thCentury impressionist master work paintings in the world. Assume that each company buys thiskind of painting and then resells the paintings at monthly auctions. Ignoring the question of anylaws that might apply, describe what economic arrangement would maximize the twocompanies’ total profits? Show with supply and demand curves what profit they would makefrom this arrangement and what societal welfare loss, if any, results from it.
Suppose there are two firms in an industry and the inverse demand function for the industry is:
P = 45 - 20
Assume that the MC functions for the two firms are:
MC1 = 15
MC2 = 12
What is the price under Courbet model?
O 15
O 24
O 30
O 36
O 21
1.Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) a Kansas wheat farm; (d) the commercial bank in which you or your family has an account; (e) the automobile industry. In each case, justify your classification. LO1
Knowledge Booster
Similar questions
- Market Share of Firms in Industry 2 30 10 25 10 10 20 The table shows market shares of firms in hypothetical industries. Assume these are distinct industries with no buyer-seller relationships or competition among them. A merger between Firm 2 and Firm 3 in Alpha would be a Industry Alpha Beta Kappa Delta 1 30 80 25 20 Select one: O a. conglomerate merger. O b. diagonal merger. O c. vertical merger. O d. horizontal merger. 32532 20 20 4 20 3 25 20 5 1 6 1arrow_forwardpenumy.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_forward18. Answer the next question based on the payoff matrix for a two-firm oligopoly where the numbers represent the firms' respective profits given each of their pricing strategies: FIRM Y O $ 800,000 O $1,000,000 O $1,450,000 Strategies: High-price If both firms collude to maximize joint profits, O $1,250,000 FIRM X High-price X = $625,000 Y = $625,000 Low-price X = $275,000 Y = $725,000 Low Price X = $725,000 Y = $275,000 X = $400,000 Y = $400,000 tal profits for the two firms will be:arrow_forward
- The inverse demand for a homogenous-product Stackelberg duopoly is P = 10-Q where Q=Q1 + Q2. The cost structure for the two firms, respectively, are C(Q1) = 4Q1 and C2(Q2) = 2Q2. Suppose Firm 2 is the leader. What is the equilibrium profit for the leader? O 7.5 O 10.5 O 12.5 O 0.5 O 0.25arrow_forward7. Based only on the knowledge that the premerger market share of two firms proposing to merge was 20 percent each, an economist working for the Justice Department was able to determine that, if approved, the postmerger HHI would increase by 800. How was the economist able to draw this conclusion without knowledge of the other firms' market shares? From this information, can you devise a general rule explaining how the Herfindahl-Hirschman index is affected when exactly two firms in the market merge? (Hint: Compare a + with (a + b)².)arrow_forwardFill in the columns in the following table. (Enter your responses as whole numbers.) TFC TVC $5 $0 5 3 q 0 1 2 3 4 5 5 5 5 5 5 5 9 16 25 36 ԼՈ MC P = MR $5 5 5 5 S LO 5 40 5 5 TR $0 TC $5 Profit $-5arrow_forward
- Question 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_forwardConsider a market with 3 Cournot firms producing a homogeneous product. Consumer demand is given by P = 130 - Q. Each firm's total costs are given by C = f + 10g, where f represents fixed costs. Suppose that firms 1 and 2 merge and that after the merger, the merged firm has fixed costsof af with 1 < a< 2. Under which condition is this merger %3D profitable for the merging firms? O a. a< 2- 200/f O b. None of the options given are correct Oc a<2- 100/f O d. a <2- 150/f O e. a<2- 50/farrow_forwardQuestion 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])?arrow_forward
- 5. Suppose that two oil companies - BP and Exxon - own adjacent natural gas fields. The profits that each firm earns depends on both the number of wells it drills and the number of wells drilled by the other firm. The table below lists each firm's individual profits: Еxxon Drill one well Drill two wells Drill one well S10 million, $10 million $6 million, $12 million BP Drill two wells S6 million, $12 million $8 million, $8 million BremSe a. Does BP have a dominant strategy? If yes, describe it. b. Does Exxon have a dominant strategy? If yes, describe it. c. Is there a Nash equilibrium? If yes, describe it. d. Suppose BP and Exxon can collude, what will be their choices?arrow_forward22 $ $70 $45 FIRM IN A CARTEL 80 $6,860 O $2,450 $2,000 98 MC ATC The graph above shows a firm which is part of a cartel. Suppose that when the cartel agreement is in place and all firms abide by the agreement, then each firm produces 80 units of output and the cartel is able to charge the price of $70 per unit. Suppose a firm cheats on the agreement by increasing its output to 98 units. Using the information given in the graph above, calculate the cheating firm's profit when it cheats on the cartel agreement (you can assume that the price charged by the cartel does not change). O $450arrow_forwardSuppose that two identical firms are Cournot competitors. Industry demand is given by: p= 200 – q. - 42 where q and q2 are the outputs of Firm 1 and Firm 2 respectively. Both Firm 1 and Firm 2 face constant marginal and average total costs of $20. Find the output quantity for each frm. 10 O 20 40 O 60 D Question 16 For the information in the above question, Find the output price. 70 50 90 100arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher: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
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education