3. The dancing machine industry is a duopoly. The two firms, Chuckie B Corp. andGene Gene Dancing Machines, compete through Cournot quantity-settingcompetition. The demand curve for the industry is P = 100 – Q, where Q is the totalquantity produced by Chuckie B and Gene Gene. Currently, each firm has marginal costof $40 and no fixed cost. Find the equilibrium price, quantity produced by each firm, andthe profit of each firm. Now suppose the two firms were to form a cartel. What would bethe quantity produced by each firm in the cartel agreement? What would be the profit ofeach firm? Suppose that Chuckie B was considering cheating on the cartel agreementand it guesses that Gene Gene is going to stick to the cartel agreement. What is the profitmaximizing output of Chuckie B in that case? Is the cartel sustainable?

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q. 2
In the long run, the positive economic profits earned by the monopolistic competitor will attract a response either from existing firms in the industry or firms outside. As those firms capture the original firm’s profit, what will happen to the original firm’s profit-maximizing price and output levels? Show on a graph
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In long run equilibrium, economic profits tend to zero in a perfectly competitive market and also in a monopolistically competitive market. This is true because both market structures share a crucial characteristic. What is the characteristic that causes economic profits to get pushed towards zero in both perfect competition and monopolistic competition?
Consider the markets for tap water, bottled water, cola, and beer. Assume there is only one provider of tap water, bottled water manufacturers use advertising to differentiate their products, cola producers engage in strategic pricing behavior, and the beer market is largely controlled by only a few firms. Classify the market for each of the following drinks as either monopoly, oligopoly, monopolistic competition, or perfect competition. Monopoly Oligopoly Monopolistic Competition Perfect Competition Tap water Bottled water Cola Beer
12. Consider a duopoly market. Two firms are selling identical products and all costs are assumed to be zero for simplicity. Market demand schedule is given in the following table. Note that firms always choose an integer value for the quantity of production. Quantity Price Total Profit 3 $12 4 11 5 8 6 6. 7 4 8 2 1 10 a. Fill in the column of total profit.
If Amazon sells dozens of similar types of pencils at slightly different prices, we might assume the pencil market is _________. Select one: a. an oligopoly. b. a monopolistically competitive market. c. a monopoly. d. a perfectly competitive market.
Suppose that a firm produces tennis racquets in a monopolistically competitive market. The following graph shows its demand curve (D), marginal revenue curve (MR), marginal cost curve (MC), and long-run average cost curve (LRAC). Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 LRAC 60 50 PRICE, COSTS, AND REVENUE (Dollars per racquet) 8 R 90 MC 10 0 0 10 D MR 50 60 70 80 90 100 20 30 40 QUANTITY (Thousands of racquets per month) Monopolistic Competition Outcome Perfect Competition Outcome Compare the average cost and the output in the long-run equilibrium for a monopolistically competitive…
Discuss some products and markets that are good examples of Monopolistic Competition. Like the market structure of perfect competition, monopolistic competition assumes inexpensive entry into the market and thus many small sellers. Like the market structure of monopoly, monopolistic competition assumes a downward sloping demand curve. This is because, unlike the identical products found in perfectly competitive markets, the products in monopolistically competitive markets are differentiated and not perfect substitutes for one another. Therefore each monopolistically competitive seller has some degree of brand loyalty and would not lose all of its customers if it slightly raised its price above that of its competition. While not facing perfectly elastic, or horizontal, demand, the monopolistically competitive firm still faces a more elastic demand than the monopolist, whose product has no substitutes. Give two examples of markets where there are many choices among products, yet we…
5- 3- 1- 20 40 60 80 100 Q MR Using the above graph, This profit-maximizing firm will produce Blank 1 units. -MC What price will this profit-maximizing firm charge? $Blank 2 (Do NOT enter the '$' in your response. Enter only the whole dollar amount; do NOT enter cents.) If the industry was perfectly competitive instead of monopolistic, then market output would be Blank 3 units and market price would be $Blank 4. (Do NOT enter the '$' in your response. Enter only the whole dollar amount; do NOT enter cents.) Blank 1 Blank 2 Blank 3 Blank 4 Add your answer Add your answer Add your answer Add your answer
A monopolistically competitive firm faces the following demand curve for its product: Price ($) 10 6. 8. 17. 6. 3 2 1 Quantity 4 6. 8. 10 12 14 16 18 20 Refer to the Table. The firm has total fixed costs of $20 and a constant marginal cost of $9 per unit. How many units will the firm produce? "Don't leave spaces before, after or in between your number.
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