Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 23, Problem 10MC
To determine
Double-marginalization problem.
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In the mobile phone market, Samsung and Apple constitute a duopoly in the production of devices.The American firm has the following demand q_a = 10 - p_a + 0.25p_s, and the Korean firm, q_s = 20 -p_s+ 0.5p_a. Because both firms assembly their devices in China, their cost structure is the same andequal to ?(q) = 10q, answer the following questions.a) What would be the equilibrium (quantity, price, and profit) in this market, and interpret youranswer.b) If they decide to form a cartel, what are the new quantities, prices, and profits?
Please provide examples of firms that belong to industries that are perfectly competitive, monopolistically competitive, duopolistic, oligopolistic or just pure monopolies. Explain the industry setup by providing examples of other firms (numbers) or market concentration statistics, some description of the product (is it standard, slightly differentiated, highly differentiated, or a crucial input that one firm has control of), and the nature of barriers to entry or exit in the industry (are they non-existent or significant, and what kinds of barriers these are).
The opioid epidemic causing a staggering number of deaths each year in the United States is largely caused by two drugs: heroin and fentanyl. Much of the heroin is supplied by several major organized Mexican cartels while the much stronger fentanyl is mostly produced in hundreds of labs (big and small) in China. The market structure for heroin can be considered as an oligopoly that operates as a monopoly. On the other hand, the fentanyl industry is less organized in terms of cartel organization and therefore more competitive.
How do the differences in the organization of both industries explain why deaths from fentanyl have skyrocketed in recent years?
The organized heroin cartel
A.does not have barriers to market entry. The more competitive fentanyl industry has substantial barriers to entry, making fentanyl a more available drug.
B.has the ability to control quantity and raise the prices. The more competitive fentanyl industry makes more of the drug available at a lower…
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Managerial Economics: A Problem Solving Approach
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- Firms like Papa John’s, Domino’s, and Pizza Hut sell pizza and other products that aredifferentiated in nature. While numerous pizza chains exist in most locations, thedifferentiated nature of these firms’ products permits them to charge prices abovemarginal cost. Given these observations, is the pizza industry most likely a monopoly,perfectly competitive, monopolistically competitive, or an oligopoly industry? Use thecausal view of structure, conduct, and performance to explain the role of differentiationin the market for pizza. Then apply the feedback critique to the role of differentiation inthe industry.arrow_forwardA group of firms that gets together to make price and output decisions is called. Single choice. a.a non-collusive oligopoly. b.price leadership. c.a cartel. d.a concentrated industry Which of the following industries is the best example of monopolistic competition?. Single choice. a.Wheat b.Restaurant d.Automobile c.Water service Which of the following is a characteristic of pure monopoly?. Single choice. a.one seller of the product b.low barriers to entry c.close substitute products d.perfect information Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm has an accounting profit of:. a.$500,000 and an economic profit of $200,000. b.$400,000 and an economic profit of $200,000. c.$300,000 and an economic profit of $400,000. d.$200,000 and an economic profit of $500,000.…arrow_forwardUnder Bertrand Oligopoly, answer why government regulators would want to try to induce Bertrand competition.arrow_forward
- Give some examples of fixed costs and variable costs. Why do average fixed costs decline across a range of increasing production? Do average variable cost decline, increase, or do both as production increases? Explain. Tell me about perfect competition. Why is it that perfect competition is more of a theoretical market structure than a practical one? In addition, please explain the most important characteristic in perfect competition, monopolistic competition, oligopoly, and monopolies and relate the characteristic to how these firms can make profits in the short run. In your analysis, make sure to relate an example for each of the market structures listed and how it relates to the particular characteristics.arrow_forwardSuppose, Pfizer Company is the only company allowed by the Sultanate government to sell COVID vaccine in Oman. According to you, what type of market Pfizer Company is having in Oman? a. Monopoly market b. Monopolistic market c. Competitive market d. Oligopoly marketarrow_forwardThe table shows the demand schedule for a particular product. Quantity Price 0 100 300 90 600 80 900 70 1200 60 1500 50 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. $80arrow_forward
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