Economics 3551 Mansfield, et. al., 7e Answers to assignments 9 and 10. Chapter 10


 Loren Morris
 3 years ago
 Views:
Transcription
1 Mansfield, et. al., 7e Chapter The Bergen Company and the Gutenberg Company are the only two firms that produce and sell a particular kind of machinery. The demand curve for their product is P = 5803Q where P is the price (in dollars) of the product, and Q is the total amount demanded. The total cost function of the Bergen Company is TC B = 410Q B where TC B is its total cost (in dollars) and Q B is its output. The total cost function of the Gutenberg Company is TC G = 460Q G where TC G is its total cost (in dollars) and Q G is its output. a. If these two firms collude and they want to maximize their combined profit, how much will the Bergen Company produce? b. How much will the Gutenberg Company produce? c. Will the Gutenberg Company agree to such an arrangement? Why or why not? a. Bergen s marginal cost (410) is always less than Gutenberg s marginal cost (460). Therefore Bergen would produce all the combination s output. Setting Bergen s marginal cost equal to the marginal revenue derived from the demand function (MR B = 580 6Q B ) yields 410 = 5806Q B so Q B = 170/6 and Q G = 0. Bergen s price will be $ and profit = $2, b. As discussed in part a, Gutenberg s marginal cost is always greater than Bergen s. If Gutenberg were to produce 1 unit and Bergen 1 unit less, it would reduce their combined profits by the difference in their marginal costs. If Gutenberg were to produce 1 unit without any reduction in Bergen s output, it would reduce their combined profits by the same amount. c. If direct payments for output restrictions between the firms were legal, Gutenberg would accept the zero output quota. But, if competition were to break out, Gutenberg would make zero profits and Bergen would also earn $0 (since competition implies P = MC). Thus the most Bergen would pay for Gutenberg s cooperation is $2,408.32, and the least Gutenberg would accept to not produce is $.01. 1
2 2. The can industry is composed of two firms. Suppose that the demand curve for cans is P = Q where P is the price (in cents) of a can and Q is the quantity demanded of cans in millions per month. Suppose the total cost function of each firm is TC = q where TC is total cost (in tens of thousands of dollars) per month and q is the quantity produced (in millions) per month by the firm. (Note: there is some confusion about units. TC is in tens of thousands of dollars per month. q is in millions of units per month. Suppose q = 1,000,000 so 15q = 15,000,000 cents. That equals 150,000 dollars which translates to $15 x 10,000. Thus total cost is = $17 x 10,000 = $170,000. The units work, but it s not immediately obvious.) a. What are the price and output if managers set price equal to marginal cost? b. What are the profit maximizing price and output if the managers collude and act like a monopolist? c. Do the managers make a higher combined profit if they collude than if they set price equal to marginal cost? If so, how much higher is their combined profit? a. Since each firm has a constant marginal cost of $0.15, the price must also be $0.15 for price to equal marginal cost. Since marginal cost equals price equals average variable cost in this case, each firm loses an amount equal to their fixed costs, $20,000. b. If they collude, they will produce where marginal revenue equals marginal cost. Marginal revenue is given by MR = 1002Q. Setting marginal revenue equal to marginal cost, the joint profit maximizing combined output is Q = 42.5 and P = $ Since the firms have constant marginal costs, only one firm should operate; therefore they would avoid the fixed costs of the other firm. Their combined profits would be π = $57.50(42.5)  [2 + 15(42.5)] = $1,804.25, or $18,042,500. If they cannot avoid the fixed costs of one of the firms by shutting it down, their combined profits would be $18,022,500. c. Since they lose $40,000 if they compete and earn $18,022,500 if they collude, they earn $18,062,500 more if they collude than if they compete. 3. An oligopolistic industry selling a particular type of machine tool is composed of two firms. Managers at the two firms set the same price and share the total market equally. The demand curve confronting each firm (assuming that the other firm sets the same price) follows, as well as each firm s total cost function. P Qd Qs TC $ $45.00 $ $47.00 $ $50.00 $ $55.00 $ $65.00 a. Assuming that each manager is correct in believing that managers at the other firm will charge the same price as they do, what price should each charge? b. Under the assumptions in part (a), what daily output rate should managers at each firm set? P (1,000) Qd Qs TC (1,000) MC MR TR $ $45.00 $50.00 $ $47.00 $2.00 $4.00 $54.00 $ $50.00 $3.00 $2.00 $56.00 $ $55.00 $5.00 $0.00 $56.00 $ $65.00 $ $2.00 $54.00 a. Each should charge a price of $9,000 since that is the last price for which MR > MC.. b. Each firm should produce 6 units. 2
3 9. In the 1960s Procter & Gamble recognized that disposable diapers could be made a mass market product and developed techniques to produce diapers at high speed and correspondingly low cost. The result was that it dominated the market. According to Harvard s Michael Porter, who made a careful study of this industry, the following were some ways in which Procter & Gamble might have signaled other firms to deter entry. Tactic 1. Signal a commitment to defend position in diapers through public statements, comments to retailers, etc. Cost to Procter & Gamble None Cost to an Entrant Raises expected cost of entry by increasing probability and extent of retaliation. 2. File a patent suit. Legal fees Incurs legal fees plus the probability that P&G wins the suit with subsequent cost to the competitor. 3. Announce planned capacity expansion. 4. Announce a new generation of diapers to be introduced in the future. None None Raises expected risk of price cutting and the probability of P&G s retaliation to entry. Raises the expected cost of entry by forcing entrant to bear possible product development and changeover costs contingent on the ultimate configuration of the new generation. a. In considering these possible tactics, why should managers at Procter & Gamble be concerned about their costs? b. Why should managers be concerned with the costs to an entrant? c. By the 1990s Procter & Gamble had to compete with high quality, private label diapers (as well as with Kimberly Clark, which successfully entered the market in the 1970s). In March, 1993 its Pampers brand had about 30 percent of the market, and its Luvs brand had about 10 percent. The price of Luvs and Pampers exceeded that of discount brands by over 30 percent. Should Procter & Gamble have cut its prices? d. In 1993 Procter & Gamble sued Paragon Trade Brands, a privatelabel producer, alleging infringement of two patents. Are lawsuits of this kind part of the process of oligopolistic rivalry and struggle? a. Obviously, Procter & Gamble must be concerned with its own costs. If it adopts a tactic that is far more costly to itself than to a potential entrant, it may cost more than it is worth. b. The point of these tactics is to raise the cost to a potential entrant and thus discourage entry. c. Whether Procter & Gamble should have cut its price depends on whether the discount brands (and KimberlyClark, which has become a major rival) would cut their prices in response and by how much. In fact, Procter & Gamble did reduce its price substantially (by 16 percent in the case of Luvs). According to Edwin Artzt, chairman of Procter & Gamble, We believe our profits are going to grow, because we re going to get volume back. d. Yes. Procter & Gamble wanted to reduce what it regarded as improper imitation of its technology. On the other hand, firms that are sued often regard such suits as attempts to intimidate them. 3
4 12. Steve Win has purchased land from the city of Atlantic City in the Marina section. There are stories of a new casino building boom in Atlantic City (MGeeM is also talking about entering, and Gump is opening his fourth casino). Some talk is circulating that Win will subdivide his new land purchase and perhaps three casinos will be built on the site. Suppose Win subdivides his land into two parcels. He builds on one site and sells the other to another gambling entrepreneur. Win estimates that the demand for gambling in the Marina area of Atlantic City (after accounting for the presence of two existing casinos in the Marina and adjusting for the rest of the casinos in Atlantic City) is P = 7505Q where P is the price associated with gambling and Q is the quantity of gambling (think of P as the average amount that a typical patron will net the casino, an amount paid for the entertainment of gambling, and Q as the number of gamblers). Win, of course, does not sell the other parcel until his casino is built (or is significantly far along); thus he has a first mover advantage. Win s total cost (TC W ) of producing gambling is TC W = Q W Q W 2 where Q W is the number of gamblers in Win s casino, and the total cost (TC R ) of producing gambling for Win s rival is TC R = Q R + 20Q R 2 where Q R is the number of gamblers in the rival s casino and Q W + Q R = Q Would Atlantic City have done better to sell the land as two separate parcels rather than as a single parcel to Win (given that Win was going to subdivide, Win and his rival could not collude, and Win did not have the ability to produce as a monopolist)? You may assume that Win and his rival could have been Cournot duopolists. If Atlantic City could do better, show why and by how much. Carry all calculations to the thousandths decimal point. The monopoly solution for Win makes MR = Q W = Q W. Solving, Q = at P =$ The last two questions involve the Cournot and Stackelberg models. I apologize for assigning them. The answers are below and (if anyone cares) I will post the solution separately. However, if Win and the rival produce as simultaneousmoving duopolists, Q W = Q r Q r = Q W Solving, Q W = and Q r = for a total of Q = and P = $ If Win can act as a first mover by selling the land parcel to the rival, Q W = 16 and Q r = 12.4 for a total of Q = and P = $ The firstmover advantage is small in this case. 4
5 Chapter Two soap producers, the Fortnum Company and the Maison Company, can stress either newspapers or magazines in their forthcoming advertising campaigns. The payoff matrix is as follows: a. Is there a dominant strategy for each firm? If so, what is it? b. What will be the profit of each firm? c. Is this game an example of the prisoner s dilemma? a. The dominant strategy for Maison is newspapers. The dominant strategy for Fortnum is magazines. b. Maison s profit will be $8 million. Fortnum s profit will be $9 million. c. This is not a prisoner s dilemma game. The players do not end up with an outcome from which both would be better off if they cooperated. 5
6 4. Two rival bookstores are trying to locate in one of two locations. The locations are near each other. Each would like to avoid a bidding war because that will drive up both of their rents. Payoffs are given in the following table: Does either player have an incentive to bid higher for a location? If so, by how much? Neither store has a dominant strategy in this game. Therefore, they have no incentive to bid for a location. When one firm makes a choice, the other firm s best strategy is to choose the other location. BUT the payoffs indicate that Location 1 is superior to location 2. Either firm would be willing to bid for that location. In fact, Barnes & Noble (B&N) appears to be in a better position to exploit location 1. The total payoff for B&N gets Location 1 and Borders gets Location 2 is 100, compared to 80 for the other Nash equilibrium. B&N would be willing to pay Borders up to (60 25) = 35 to persuade Borders to select Location 2. 6
7 5. Two soft drink producers, York Cola and Reno Cola, secretly collude to fix prices. Each firm must decide whether to abide by the agreement or to cheat on it. The payoff matrix is as follows: a. What strategy will each firm choose, and what will be each firm s profit? b. Does it matter whether this agreement is for one period or for three periods? c. Is this game an example of the prisoner s dilemma? a. Reno and York each have cheat as their dominant strategy, so they will each earn $28 million. b. Since abiding by the agreement would raise their profits to $29 million each if this game were to be played out an infinite number of times, the dominant strategy would be for both to abide if they thought that a defection would be met with cheating by their opponents in all future rounds. c. Yes, this is a prisoner s dilemma since the firms are stuck in an outcome from which both could be made better off by cooperation. 7
Microeconomics (Oligopoly & Game, Ch 12)
Microeconomics (Oligopoly & Game, Ch 12) Lecture 1718, (Minor 2 coverage until Lecture 18) Mar 16 & 20, 2017 CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4
More information11. Oligopoly. Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27
11. Oligopoly Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27 04.07.2017 Prof. Dr. Kerstin Schneider Chair of Public Economics and Business Taxation Microeconomics Chapter 11 Slide 1 Chapter
More informationThe Analysis of Competitive Markets
C H A P T E R 12 The Analysis of Competitive Markets Prepared by: Fernando & Yvonn Quijano CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition versus
More informationChapter 13. Game Theory. Gaming and Strategic Decisions. Noncooperative v. Cooperative Games
Chapter 13 Game Theory Gaming and Strategic Decisions Game theory tries to determine optimal strategy for each player Strategy is a rule or plan of action for playing the game Optimal strategy for a player
More informationRecall from last time. Econ 410: Micro Theory. Cournot Equilibrium. The plan for today. Comparing Cournot, Stackelberg, and Bertrand Equilibria
Slide Slide 3 Recall from last time A Nash Equilibrium occurs when: Econ 40: Micro Theory Comparing Cournot, Stackelberg, and Bertrand Equilibria Monday, December 3 rd, 007 Each firm s action is a best
More informationOligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.
Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry
More informationChapter 6. Game Theory Two
6.8 Repeated Games A game that is played only once is called a oneshot game. Repeated games are games that are played over and over again. Repeated Game = A game in which actions are taken and payoffs
More informationIntroduction. Learning Objectives. Learning Objectives. Chapter 27. Oligopoly and Strategic Behavior
Chapter 27 Oligopoly and Introduction On a typical day, United Parcel Service will transport over 10 million packages. UPS and its main rival, FedEx Ground, earn more than threefourths of total revenue
More informationPrinciples of Microeconomics Assignment 8 (Chapter 10) Answer Sheet. Class Day/Time
1 Principles of Microeconomics Assignment 8 (Chapter 10) Answer Sheet Name Class Day/Time Questions of this homework are in the next few pages. Please find the answer of the questions and fill in the blanks
More information29/02/2016. Market structure II Other types of imperfect competition. What Is Monopolistic Competition? OTHER TYPES OF IMPERFECT COMPETITION
Market structure II Other types of imperfect competition OTHER TYPES OF IMPERFECT COMPETITION Characteristics of Monopolistic Competition Monopolistic competition is a market structure in which many firms
More informationChapter 15 Oligopoly
Goldwasser AP Microeconomics Chapter 15 Oligopoly BEFORE YOU READ THE CHAPTER Summary This chapter explores oligopoly, a market structure characterized by a few firms producing a product that mayor may
More informationC H A P T E R 12. Monopolistic Competition and Oligopoly CHAPTER OUTLINE
C H A P T E R 12 Monopolistic Competition and Oligopoly CHAPTER OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition versus Collusion: The Prisoners Dilemma 12.5
More informationChapter 12. Oligopoly. Oligopoly Characteristics. ) of firms Product differentiation may or may not exist ) to entry. Chapter 12 2
Chapter Oligopoly Oligopoly Characteristics ( ) of firms Product differentiation may or may not exist ( ) to entry Chapter Oligopoly Equilibrium ( ) Equilibrium Firms are doing the best they can and have
More informationUse the following to answer question 4:
Homework Chapter 11: Name: Due Date: Wednesday, December 4 at the beginning of class. Please mark your answers on a Scantron. It is late if your Scantron is not complete when I ask for it at 9:35. Get
More informationOligopolies Part III
Oligopolies Part III It's called an oligopoly. It's not a regular market. It's a market in which they control the prices and they've been doing it for years. Richard Miller The Prisoner s Dilemma Consider
More information14.1 Comparison of Market Structures
14.1 Comparison of Structures Chapter 14 Oligopoly 142 14.2 Cartels Cartel in Korea Oligopolistic firms have an incentive to collude, coordinate setting their prices or quantities, so as to increase their
More informationECON 230D2002 Midterm 1. Student Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
ECON 230D2002 Midterm 1 Name Student Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Scenario 12.3: Suppose a stream is discovered whose
More information14.01 Principles of Microeconomics, Fall 2007 ChiaHui Chen November 7, Lecture 22
Monopoly. Principles of Microeconomics, Fall ChiaHui Chen November, Lecture Monopoly Outline. Chap : Monopoly. Chap : Shift in Demand and Effect of Tax Monopoly The monopolist is the single supplyside
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Review 101415 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1. The fourfirm concentration ratio equals the percentage of the value of accounted
More informationEco201 Review questions for chapters Prof. Bill Even ====QUESTIONS FOR CHAPTER 13=============================
Eco201 Review questions for chapters 1315 Prof. Bill Even ====QUESTIONS FOR CHAPTER 13============================= 1) A monopoly has two key features, which are. A) barriers to entry and close substitutes
More informationMONOPOLISTIC COMPETITION
14 MONOPOLISTIC COMPETITION The online shoe store shoebuy.com lists athletic shooes made by 56 different producers in 40 different categories and price between$25 and $850. It offers 1,404 different types
More informationCOST OF PRODUCTION & THEORY OF THE FIRM
MICROECONOMICS: UNIT III COST OF PRODUCTION & THEORY OF THE FIRM One of the concepts mentioned in both Units I and II was and its components, total cost and total revenue. In this unit, costs and revenue
More informationDo not open this exam until told to do so. Solution
Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Fall 003 Final (Version): Intermediate Microeconomics (ECON30) Solution Final (Version
More informationOligopoly Pricing. EC 202 Lecture IV. Francesco Nava. January London School of Economics. Nava (LSE) EC 202 Lecture IV Jan / 13
Oligopoly Pricing EC 202 Lecture IV Francesco Nava London School of Economics January 2011 Nava (LSE) EC 202 Lecture IV Jan 2011 1 / 13 Summary The models of competition presented in MT explored the consequences
More informationChapter 12. Oligopoly. Oligopoly Characteristics. Oligopoly Equilibrium
Chapter Oligopoly Oligopoly Characteristics Small number of firms Product differentiation may or may not eist Barriers to entry Chapter Oligopoly Equilibrium Defining Equilibrium Firms are doing the best
More informationChapter 13. Oligopoly and Monopolistic Competition
Chapter 13 Oligopoly and Monopolistic Competition Chapter Outline Some Specific Oligopoly Models : Cournot, Bertrand and Stackelberg Competition When There are Increasing Returns to Scale Monopolistic
More informationPractice Problems 2. State Price Elasticity Massachussets $ Ohio $ Utah $
Firms and Markets Assignments and Problems Price Discrimination and Auctions Practice Problems 2 1. Many states sell vanity license plates (with personalized initials) to drivers, for extra fees. The cost
More informationECMC02H Intermediate Microeconomics  Topics in Price Theory
1 ECMC02H Intermediate Microeconomics  Topics in Price Theory Answers to the Term Test June 23, 2010 Version A of the test Your name (Print clearly and underline your last name) Your student number 1.
More informationAQA Economics Alevel
AQA Economics Alevel Microeconomics Topic 5: Perfect Competition, Imperfectly Competitive Markets and Monopoly 5.5 Oligopoly Notes Characteristics of an oligopoly: High barriers to entry and exit There
More informationEcon 201 Review Notes  Part 3
Econ 201 Review Notes  Part 3 This is intended as a supplement to the lectures and section. It is what I would talk about in section if we had more time. After the first three chapters where we talked
More informationChapter 12. A Game Theoretic Approach to Strategic Behavior
Chapter 12 A Game Theoretic Approach to Strategic Behavior Chapter Outline An Introduction to the Theory of Games Prisoner s Dilemma Nash Equilibrium Maximin Strategy Strategies for Repeated Play Sequential
More informationManagerial Economics & Business Strategy Chapter 9. Basic Oligopoly Models
Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models Overview I. Conditions for Oligopoly? II. Role of Strategic Interdependence III. Profit Maximization in Four Oligopoly Settings
More informationINTERMEDIATE MICROECONOMICS LECTURE 13  MONOPOLISTIC COMPETITION AND OLIGOPOLY. Monopolistic Competition
131 INTERMEDIATE MICROECONOMICS LECTURE 13  MONOPOLISTIC COMPETITION AND OLIGOPOLY Monopolistic Competition Pure monopoly and perfect competition are rare in the real world. Most realworld industries
More informationOLIGOPOLY. After studying this chapter, you will be able to:
After studying this chapter, you will be able to: Define and identify oligopoly Use game theory to explain how price and output are determined in oligopoly Use game theory to explain other strategic decisions
More informationAP Microeconomics Review Session #3 Key Terms & Concepts
The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Shortrun vs. longrun decisions 3. Fixed inputs vs. variable inputs 4. Shortrun production measures: be able to calculate/graph
More informationChapter 15: Industrial Organization
Chapter 15: Industrial Organization Imperfect Competition Product Differentiation Advertising Monopolistic Competition Oligopoly Collusion Cournot Model Stackelberg Model Bertrand Model Cartel Legal Provisions
More informationLecture 11 Imperfect Competition
Lecture 11 Imperfect Competition Business 5017 Managerial Economics Kam Yu Fall 2013 Outline 1 Introduction 2 Monopolistic Competition 3 Oligopoly Modelling Reality The Stackelberg Leadership Model Collusion
More information! lecture 7:! competition and collusion!!
! lecture 7:! competition and collusion!! the story so far Natural monopoly: Definitions (Ideal) Pricing solutions Regulation in practice Regulation under asymmetric information Competition policy: Introduction
More informationsample test 3  spring 2013
sample test 3  spring 2013 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. A natural monopoly occurs when a. the product is sold in its
More informationChapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting
Microeconomics Modified by: Yun Wang Florida International University Spring, 2018 1 Chapter 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Outline 13.1 Demand and
More informationECON December 4, 2008 Exam 3
Name Portion of ID# Multiple Choice: Identify the letter of the choice that best completes the statement or answers the question. 1. A fundamental source of monopoly market power arises from a. perfectly
More informationPrinciples of Microeconomics Module 5.1. Understanding Profit
Principles of Microeconomics Module 5.1 Understanding Profit 180 Production Choices of Firms All firms have one goal in mind: MAX PROFITS PROFITS = TOTAL REVENUE TOTAL COST Two ways to reach this goal:
More informationChapter 14 TRADITIONAL MODELS OF IMPERFECT COMPETITION. Copyright 2005 by SouthWestern, a division of Thomson Learning. All rights reserved.
Chapter 14 TRADITIONAL MODELS OF IMPERFECT COMPETITION Copyright 2005 by SouthWestern, a division of Thomson Learning. All rights reserved. 1 Pricing Under Homogeneous Oligopoly We will assume that the
More informationMonopolistic Competition Oligopoly Duopoly Monopoly. The further right on the scale, the greater the degree of monopoly power exercised by the firm.
Oligopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on the scale, the greater the degree of monopoly power exercised by the firm. Imperfect competition refers to those market
More informationECO201: PRINCIPLES OF MICROECONOMICS SECOND MIDTERM EXAMINATION
Name Seat Assignment ECO201: PRINCIPLES OF MICROECONOMICS SECOND MIDTERM EXAMINATION November 17, 2009 FORM 3. Directions 1. FILL IN YOUR SCANTRON WITH YOUR UNIQUE ID AND THE FORM NUMBER LISTED ON THIS
More informationECONOMICS. Paper 3 : Fundamentals of Microeconomic Theory Module 28 : Non collusive and Collusive model
Subject Paper No and Title Module No and Title Module Tag 3 : Fundamentals of Microeconomic Theory 28 : Non collusive and Collusive model ECO_P3_M28 TABLE OF CONTENTS 1. Learning Outcomes 2. Introduction
More informationMicroeconomics. More Tutorial at
Microeconomics 1. Suppose a firm in a perfectly competitive market produces and sells 8 units of output and has a marginal revenue of $8.00. What would be the firm s total revenue if it instead produced
More informationMicroeconomics LESSON 6 ACTIVITY 40
Microeconomics LESSON 6 ACTIVITY 40 Monopolistic Competition Figure 40.1 Monopolistically Competitive Firm in the Short Run MC COSTS/REVENUE (DOLLARS) E D C B A F H K G ATC D 0 MR L M QUANTITY 1. Use Figure
More informationLecture 22. Oligopoly & Monopolistic Competition
Lecture 22. Oligopoly & Monopolistic Competition Course Evaluations on Thursday: Be sure to bring laptop, smartphone, or tablet with browser, so that you can complete your evaluation in class. Oligopoly
More informationECO201: PRINCIPLES OF MICROECONOMICS SECOND MIDTERM EXAMINATION
Name Seat Assignment ECO201: PRINCIPLES OF MICROECONOMICS SECOND MIDTERM EXAMINATION November 17, 2009 FORM 1. Directions 1. FILL IN YOUR SCANTRON WITH YOUR UNIQUE ID AND THE FORM NUMBER LISTED ON THIS
More informationSyllabus item: 57 Weight: 3
1.5 Theory of the firm and its market structures  Monopoly Syllabus item: 57 Weight: 3 Main idea 1 Monopoly:  Only one firm producing the product (Firm = industry)  Barriers to entry or exit exists,
More informationChapter 11 Entry and Exit
Chapter 11 Entry and Exit Prof. Jepsen ECO 610 Lecture 7 December 12, 2012 John Wiley and Sons Outline Barriers to entry Barriers to exit Entrydeterring strategies Exitpromoting strategies Forms of Entry
More informationOligopoly. Quantity Price(per year) 0 $120 2,000 $100 4,000 $80 6,000 $60 8,000 $40 10,000 $20 12,000 $0
Oligopoly 1. Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as a. monopoly markets. b. perfectly competitive markets. c. monopolistically
More informationQOD #: 29: Graphing Practice w/ Mr. Clifford
LO1 101 AGENDA Thurs 10/29 Regulated Monopoly (FRQ 2011 & 2012) QOD #: 29: Graphing Practice w/ Mr. Clifford Price Discriminating Monopoly Monopolistic Competition & Oligopoly CH 8/9 Results/TC & Retakes
More informationUnit 4: Imperfect Competition
Unit 4: Imperfect Competition 1 Monopoly 2 Characteristics of Monopolies 3 5 Characteristics of a Monopoly 1. Single Seller One Firm controls the vast majority of a market The Firm IS the Industry 2. Unique
More informationUnit 4: Imperfect Competition
Unit 4: Imperfect Competition 1 Monopoly 2 Characteristics of Monopolies 3 5 Characteristics of a Monopoly 1. Single Seller One Firm controls the vast majority of a market The Firm IS the Industry 2. Unique
More informationCONTENTS. Introduction to the Series. 1 Introduction to Economics 5 2 Competitive Markets, Demand and Supply Elasticities 37
CONTENTS Introduction to the Series iv 1 Introduction to Economics 5 2 Competitive Markets, Demand and Supply 17 3 Elasticities 37 4 Government Intervention in Markets 44 5 Market Failure 53 6 Costs of
More informationMIDTERM I. GROUP A Instructions: December 9, 2010
EC101 Sections 04 Fall 2010 NAME: ID #: SECTION: MIDTERM I December 9, 2010 GROUP A Instructions: You have 60 minutes to complete the exam. There will be no extensions. Students are not allowed to go out
More informationUnit 4: Imperfect Competition
Unit 4: Imperfect Competition 1 FOUR MARKET STRUCTURES Perfect Competition Monopolistic Competition Oligopoly Pure Monopoly Imperfect Competition Every product is sold in a market that can be considered
More informationPractice Exam 3: S201 Walker Fall with answers to MC
Practice Exam 3: S201 Walker Fall 2007  with answers to MC Print Your Name: I. Multiple Choice (3 points each) 1. If marginal utility is falling then A. total utility must be falling. B. marginal utility
More informationEconomics of Strategy Fifth Edition. Besanko, Dranove, Shanley, and Schaefer. Chapter 11. Entry and Exit. Copyright 2010 John Wiley Sons, Inc.
Economics of Strategy Fifth Edition Besanko, Dranove, Shanley, and Schaefer Chapter 11 Entry and Exit Slides by: Richard Ponarul, California State University, Chico Copyright 2010 John Wiley Sons, Inc.
More informationChapter 13 Outline. Challenge: Intel and AMD s Advertising Strategies. An Overview of Game Theory. An Overview of Game Theory
Chapter 13 Game Theory A camper awakens to the growl of a hungry bear and sees his friend putting on a pair of running shoes. You can t outrun a bear, scoffs the camper. His friend coolly replies, I don
More informationVERSION 1. Economics 101 Lec 3 Elizabeth Kelly Fall 2000 Midterm #3 / Version #1 December 4, Student Name: ID Number: Section Number: TA Name:
Economics 101 Lec 3 Elizabeth Kelly Fall 2000 Midterm #3 / Version #1 December 4, 2000 VERSION 1 TF+MC roblem Total Student Name: ID Number: Section Number: TA Name: NOTE: This information and the similar
More informationIntroduction. Learning Objectives. Learning Objectives. Economics Today Twelfth Edition. Chapter 25 Monopolistic Competition
Roger LeRoy Miller Economics Today Twelfth Edition Chapter 25 Copyright 2004 Pearson Addison Wesley. All rights reserved. Introduction Thomas Jefferson extolled the virtues of allowing individuals to pursue
More informationEdexcel (A) Economics Alevel
Edexcel (A) Economics Alevel Theme 3: Business Behaviour & the Labour Market 3.4 Market Structures 3.4.4 Oligopoly Notes Characteristics of an oligopoly: High barriers to entry and exit There are high
More informationPerfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product.
Perfect Competition In this section of work and the next one we derive the equilibrium positions of firms in order to determine whether or not it is profitable for a firm to produce and, if so, what quantities
More informationWelfare Economics. The Edgeworth Box. The Basic Theorem. Some Basic Assumptions
Welfare Economics The Edgeworth Box The Basic Theorem The basic theorem in welfare economics: A market, exchange, economy will achieve efficient resource allocation. We intend to show the basics of that
More informationEconomics 101 Section 5
Economics 101 Section 5 Lecture #22 April 13, 2004 Chapter 10 Monopolistic Competition Oligopoly Game Theory Monopolistic Competition 3 characteristics of a monopolistically competitive market 1) Many
More informationECN 3103 INDUSTRIAL ORGANISATION
ECN 3103 INDUSTRIAL ORGANISATION 5. Game Theory Mr. Sydney Armstrong Lecturer 1 The University of Guyana 1 Semester 1, 2016 OUR PLAN Analyze Strategic price and Quantity Competition (Noncooperative Oligopolies)
More informationChart: Initial Conditions in Computer Market
Oligopolies Part II It's called an oligopoly. It's not a regular market. It's a market in which they control the prices and they've been doing it for years. Richard Miller Oligopoly Behavior Market structure
More informationAGEC 3333 Practice Questions for Exam 3 Fall Semester, 2009 Set A: Material From Chapter 10, Pages ,
(1) (from page 108) Match each industry description with the proper identification by drawing a line between the description and identification. a market with many buyers and sellers with roughly equal
More informationMonopolistic Competition
Monopolistic Competition CHAPTER16 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Describe and identify monopolistic competition. 2 Explain how
More informationMonopoly Monopoly occurs when there is a single seller of a good or service. Despite this simple definition that is usually given in textbooks, we
Monopoly Monopoly occurs when there is a single seller of a good or service. Despite this simple definition that is usually given in textbooks, we must criticize it a bit. Monopoly occurs when there is
More informationEco 685 Graphs, Tables, and Definitions
Eco 685 Graphs, Tables, and Definitions David L. Kelly 1 1 Department of Economics, University of Miami dkelly@miami.edu Fall, 2017 Introduction Introduction Managerial Economics Definition Definition
More informationEconomics of Managerial Decision Making (MGEC 611) SAMPLE EXAM
Economics of Managerial Decision Making (MGEC 611) SAMPLE EXAM QUESTION 1 Short Questions. This part consists of three short, standalone questions of lower math intensity. Please provide an answer or
More informationChapter 10 Pure Monopoly
Chapter 10 Pure Monopoly Multiple Choice Questions 1. Pure monopoly means: A. any market in which the demand curve to the firm is downsloping. B. a standardized product being produced by many firms. C.
More informationSAMPLE MULTIPLE CHOICE FINAL EXAM CHAPTER 6 THE ANALYSIS OF COSTS
1. SAMPLE MULTIPLE CHOICE FINAL EXAM CHAPTER 6 THE ANALYSIS OF COSTS Longrun average cost equals longrun marginal cost whenever a) the production function exhibits constant returns to scale. b) fixed
More informationFINALTERM EXAMINATION FALL 2006
FINALTERM EXAMINATION FALL 2006 QUESTION NO: 1 (MARKS: 1)  PLEASE CHOOSE ONE Compared to the equilibrium price and quantity sold in a competitive market, a monopolist Will charge a price and sell a quantity.
More informationEcon 2113: Principles of Microeconomics. Spring 2009 ECU
Econ 2113: Principles of Microeconomics Spring 2009 ECU Chapter 12 Monopoly Market Power Market power is the ability to influence the market, and in particular the market price, by influencing the total
More informationAt P = $120, Q = 1,000, and marginal revenue is ,000 = $100
Microeconomics, monopoly, final exam practice problems (The attached PDF file has better formatting.) *Question 1.1: Marginal Revenue Assume the demand curve is linear.! At P = $100, total revenue is $200,000.!
More informationStudent Manual Principles of Economics
Student Manual Principles of Economics Beat The Market On Line: An Interactive Microeconomics Game. GoldSimulations www.goldsimulations.com Beat The Market : Student Manual Published by GoldSimulations
More informationPractice Exam 3: S201 Walker Fall 2004
Practice Exam 3: S201 Walker Fall 2004 I. Multiple Choice (3 points each) 1. Which of the following statements about the shortrun is false? A. The marginal product of labor may increase or decrease. B.
More informationMonopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials
LESSON 5 Monopoly Introduction and Description Lesson 5 extends the theory of the firm to the model of a Students will see that the profitmaximization rules for the monopoly are the same as they were
More informationCHAPTER 5 THE ANALYSIS OF COSTS
1. CHAPTER 5 THE ANALYSIS OF COSTS Longrun average cost equals longrun marginal cost whenever a) the production function exhibits constant returns to scale. b) fixed costs are zero. c) no factor always
More information1 Which of the following is the best description of a monopolistically competitive industry?
1 Which of the following is the best description of a monopolistically competitive industry? A) An industry in which a large number of rival firms sell products that are close, but not perfect, substitutes.
More information#1: Monopolistic Competition
Answers: #1: Monopolistic Competition MC1. d. All of the terms describe economically breaking even MC2. c. Economic profits will attract competition MC3. d. Economically breaking even means you just
More informationThis paper is not to be removed from the Examination Halls
~~EC2066 ZA d0 This paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON EC2066 ZA BSc degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences,
More informationCHAPTER NINE MONOPOLY
CHAPTER NINE MONOPOLY This chapter examines how a market controlled by a single producer behaves. What price will a monopolist charge for his output? How much will he produce? The basic characteristics
More informationManagerial Economics Chapter 9 Practice Question
ECO 3320 Lanlan Chu Managerial Economics Chapter 9 Practice Question 1. The market for widgets consists of two firms that produce identical products. Competition in the market is such that each of the
More informationThe Competitive Model in a More Realistic Setting
CHAPTER 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Summary and Learning Objectives 13.1 Demand and Marginal Revenue for a Firm in a Monopolistically Competitive
More informationShort run and long run price and output decisions of a monopoly firm,
1 Chapter 1Theory of Monopoly SyllabusConcept of imperfect competition, Short run and long run price and output decisions of a monopoly firm, Concept of a supply curve under monopoly, comparison of perfect
More informationEcon Microeconomic Analysis and Policy
ECON 500 Microeconomic Theory Econ 500  Microeconomic Analysis and Policy Monopoly Monopoly A monopoly is a single firm that serves an entire market and faces the market demand curve for its output. Unlike
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is correct? A) Consumers have the ability to buy everything
More informationSolutions to Final Exam
Solutions to Final Exam AEC 504  Summer 2007 Fundamentals of Economics c 2007 Alexander Barinov 1 Veni, vidi, vici (30 points) Two firms with constant marginal costs serve two markets for two different
More informationMicroeconomics 2302 Potential questions and study guide for Exam 2. 6 of these will be on your exam.
Microeconomics 2302 Potential questions and study guide for Exam 2 6 of these will be on your exam. Potential questions are in Black Font. Study Guide stuff is in red font. 1. Elasticity question 1 a.
More informationAGENDA Mon 10/12. Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp Q #7
AGENDA Mon 10/12 Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp 173176 Q #7 QOD #21: Competitive Farming A purely competitive wheat farmer can sell
More informationFigure: Computing Monopoly Profit
Name: Date: 1. Compared to perfect competition: A) monopoly produces more at a lower price. B) monopoly produces where MR > MC, and a perfectly competitively firm produces where P = MC. C) monopoly may
More informationA Model of Monopoly. Monopoly Profit Maximization. The Monopolist s Price and Output Numerically. The Monopolist s Price and Output Numerically
A Model of Monopoly Monopoly Profit Maximization How much should the monopolistic firm choose to produce if it wants to maximize profit? Chapter 153 The Monopolist s and The first thing to remember is
More informationProduction in Perfectly Competitive Markets. How prices act as signals for production decisions in markets with many suppliers
Production in Perfectly Competitive Markets How prices act as signals for production decisions in markets with many suppliers Demand and Supply Analysis Assumed that there were many buyers and sellers
More informationEdexcel (B) Economics Alevel
Edexcel (B) Economics Alevel Theme 4: Making Markets Work 4.2 Market Power and Market Failure 4.2.1 Market failure Notes Significance of market power: o Cartels, collusion, restrictive practices and tacit
More information