Individual solution - 8

pdf

School

Simon Fraser University *

*We aren’t endorsed by this school

Course

552

Subject

Economics

Date

Apr 3, 2024

Type

pdf

Pages

Uploaded by BarristerMetalPigeon35

Individual assignment – Module 8 solution 1a. Using the appropriate graph, show how Hyundai should respond if Samsung first reduces output unilaterally, other things equal. Explain your diagram and what it shows, briefly. The market structure is a Cournot model where firms compete by choosing outputs to maximize profits, considering their beliefs about their rivals' production levels. In case Samsung decides to reduce its output unilaterally from Q² to Q¹2, Hyundai should consider increasing its output from Q¹ to Q¹¹. Hyundai has significant market power and aims to maximize its economic profits. By increasing its output, Hyundai can also increase its market share. Moreover, if Hyundai's marginal cost is lower than Samsung's, the increase in output by Hyundai will result in them gaining more than 50% of the market share. b. Give an economic rationale for Hyundai’s actual reaction (reducing chip output). Hyundai has decided to reduce its output of chips in the market in order to address the current supply and demand imbalance. The current scenario of oversupply has led to a significant reduction in price, which in turn is impacting the company’s profitability. Hyundai may be facing losses due to its high production levels and low demand for their unsold chips.. Oversupply has caused a significant drop in chip prices, which has impacted Hyundai's profitability. By reducing production, Hyundai hopes to avoid making losses due to unsold chips, as the demand for them is currently low. Since the company cannot directly influence demand to increase, it has decided to control the supply instead. Samsung, has already announced halting production levels (trigger strategy), and Hyundai plans to follow suit. This will help ensure that the supply and demand curves match more closely, and the economic profits of all chip makers facing a shortage will be maintained at a healthy level. By doing this, Hyundai and Samsung can tacitly collude with the rest of the market to prevent DRAM prices from continuing to decline and protect their profits.

c. Cite (at least) two pieces of evidence in the article suggesting that the industry is an oligopoly . The industry represented in the question is an oligopoly. “South Korean Manufacturers command 60 percent of the 64-megabit chip market, according to analysts.” “If South Korea’s three main chip makers cut production, analysts estimate that DRAM prices could jump to $15 during the next month.” According to the data, it seems that there are only a limited number of companies present in the market, and they hold a significant portion of the market share. This situation, where a few companies dominate the market, is known as an oligopoly market structure. “Hyundai’s move came after Samsung Electronics Co., the world’s largest memory-chip producer, earlier this week said that it was considering reducing production for the same reasons”.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Related Documents

ch.5 Sensitivity Analysis Notes.docx

Assignment 6 PYSCH210.docx

Fin 178 Maxed Practice Problems.xlsx

HIMT365_MidtermExamLessons1-7_Tucker.docx

categorical_HW.pdf

Econ Individual Assignment solutn 10.pdf

BADM 685_Assignment 5.docx

CAN 22 S2 Type 1 and Type 2 Errors.pdf

Quiz 3.2_ Flowcharts 5.pdf

TPS6.pdf

Quiz 3.2_ Flowcharts quiz 4.pdf

POS_486_Midterm_Review.docx

Recommended textbooks for you

Managerial Economics: Applications, Strategies an...

Economics

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:Cengage Learning

Microeconomic Theory

Economics

ISBN:9781337517942

Author:NICHOLSON

Publisher:Cengage

Principles of Microeconomics

Economics

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Economics:

Economics

ISBN:9781285859460

Author:BOYES, William

Publisher:Cengage Learning

Micro Economics For Today

Economics

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Cengage,

Survey Of Economics

Economics

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Cengage,

SEE MORE TEXTBOOKS

Recommended textbooks for you

Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Microeconomic Theory
Economics
ISBN:9781337517942
Author:NICHOLSON
Publisher:Cengage
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics:
Economics
ISBN:9781285859460
Author:BOYES, William
Publisher:Cengage Learning
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,