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 9MC
To determine
Exclusive territory rights.
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With the aid of practical examples ,distinguish between the following concepts ,a)increasing returns to scale and decreasing returns to scale b)Fairly elastic demand and fairly inelastic demand c)monopolistic competition and oligopoly market
Which of the following factors would make it more DIFFICULT for a seller in the market for coffee to collude successfully with his rivals?
A) The coffee market includes a small number of firms.
B) Firms in the coffee market place a very high value on profits earned in the present but discount significantly future profits.
C) Coffee consumers are very loyal.
D) Prices in the coffee market are relatively stable and do not change often.
E) The antitrust agencies shut down and stop looking for cartel activity.
Which of the following do not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions?
1.Reductions in both supplier and buyer bargaining power and higher barriers to entry into the industry
2. Reductions in uncertainty and business risk, changes in who buys the product and how they use it, and diffusion of technical know-how across more companies and more countries
3. Changes in an industry's long-term growth rate and changes in cost and efficiency
4. Entry or exit of major firms, government policy changes and/or regulatory influences
5. Growing buyer preferences for a more standardized product instead of strongly differentiated products (or for a more differentiated product instead of nearly identical or weakly differentiated products.
Chapter 23 Solutions
Managerial Economics: A Problem Solving Approach
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- Question 10.10. The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why there are barriers to entry in pure monopoly. a monopoly has a perfectly elastic demand curve. marginal revenue is less than average revenue. total revenues are greater than total costs at the profit-maximizing level of output. Question 11.11. Which case below best represents a case of price discrimination? An insurance company offers discounts to safe drivers. A major airline sells tickets to senior citizens at lower prices than to other passengers. A professional baseball team pays two players with identical batting averages different salaries. A utility company charges less for electricity used during "off-peak" hours, when it does not have to operate its less-efficient generating plants. Question 12.12. In which industry is monopolistic competition most likely to be…arrow_forwardGovernment regulation of early American monopolies was initially absent. However, the creation of antitrust regulation in the United States, in the form of the 1890 Sherman Antitrust Act, led to the eventual dismantling and restructuring of Standard Oil and American Tobacco by 1911. Like many antitrust cases brought against companies even today, it took several years for these first cases to navigate through the court system Unlike Standard Oil and American Tobacco, U.S. Steel was challenged, but not found to be the sole supplier of steel to the U.S. market. However, it continued to possess considerable market share for many years. In 2018, U.S. Steel was the 26th-largest producer of steel in the world, according to the World Steel Association. More Modern Times A more recent monopoly to have experienced the same fate as Standard Oil and American Tobacco is the American Telephone and Telegraph Company (AT&T). In 1982, AT&T was found to be in violation of U.S. antitrust law…arrow_forwardIf patents reduce competition, why does the federal government grant them? The federal government grants patents A. to increase the number of close substitutes available. B. to prevent network externalities. C. to create natural monopolies. D. to encourage firms to collude. E. to encourage firms to spend money on research to create new products.arrow_forward
- Antitrust laws are designed to maintain a competitive market environment by a. eliminating monopolies wherever they exist b. preventing monopolies from generating negative externalities c. limiting practices that increase a firm’s market power d. imposing price ceilings on products produced by monopolies e. making charging a price above marginal cost illegalarrow_forwardWhich of the market structures (perfect competition, monopolistic competition, oligopoly, or monopoly) is best suited for northeastern USA? Why? Support your answer with the pros and cons of your argument.arrow_forwardA natural monopoly is most likely to occur in which of the following industries? Group of answer choices a. the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years b. the diamond mining and marketing industry because one firm can control a key resource c. the software industry because of the importance of network externalities d. an industry where fixed costs are very large relative to variable costsarrow_forward
- Oligopolies and Cartels A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $1,000 per diamond, and the demand for diamonds is described by the following schedule: Price Quantity (Dollars) (Diamonds) 8,000 5,000 7,000 6,000 6,000 7,000 5,000 8,000 4,000 9,000 3,000 10,000 2,000 11,000 1,000 12,000 If there were many suppliers of diamonds, the price would be $______ per diamond and the quantity sold would be _________diamonds. If there were only one supplier of diamonds, the price would be$______per diamond and the quantity sold would be ________diamonds. Suppose Russia and South Africa form a cartel. In this case, the price would be $__________ per diamond and the total quantity sold would be ______ diamonds. If the countries split the market evenly, South Africa would produce ________ diamonds and earn a profit of $________. If…arrow_forwardOligopolies and Cartels A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $1,000 per diamond, and the demand for diamonds is described by the following schedule: Price Quantity (Dollars) (Diamonds) 8,000 5,000 7,000 6,000 6,000 7,000 5,000 8,000 4,000 9,000 3,000 10,000 2,000 11,000 1,000 12,000arrow_forwardChoose the most appropriate answer. 1.1 Read the following extract and answer question 1.1, 1.2. Evidence of dominationBoth the Competition Commission and Icasa found, in their inquiries, that Vodacom and MTN are dominantacross the supply chain. Their dominance is even more entrenched by the spectrum-sharing deals that they haveentered into with Cell C, Liquid Intelligent Technologies and Rain. Cell C is wholly reliant on MTN and Vodacomto provide mobile services, and Liquid and Rain are disincentivised from competing aggressively in the mobilemarket due to the lucrative deals they have struck to provide capacity to either Vodacom or MTN, or both. Thishas limited their ability to compete independently – leaving Telkom as the only entity in the position to be able tochallenge the “cosy” market structure head-on.Source: https://techcentral.co.za/mcleod-is-wrong-about-telkom/110373/Accessed: 19/08/21 The economic argument being expressed in this extract is that of __________ and has the…arrow_forward
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