6. (10 points) Omega Travel competes in the highly competitive market for travel. Consumersknow that Omega has the best agents in the industry and offers superior service. Nonetheless,Omega earns zero economic profits because numerous competitors have entered the market overthe last few years. Based on this information, does Omega operate in a perfectly competitivemarket or a monopolistically competitive market? Please give an explanation.7. (10 points) Alpha Corporation operates in a highly competitive market. While there are only afew other firms in the market due to the high fixed costs of building plants, rival firms are veryaggressive in their pricing strategies. Of the products sold in the market, over 80 percent have 10years of patent protection remaining. Does this industry meet an economist's definition of aperfectly competitive industry? Please give an explanation based on the information in thequestion and the assumptions about perfect competition.If Alpha Corporation follows all the assumptions of perfect competition, you must explain that.If Alpha Corporation violates some (or all) of the assumptions of perfect competition, you mustexplain which assumptions it violates and how it violates them.

6. Omega TravelOmega Travel's situation suggests it operates in a monopolistically competitive…

Answered: 6. (10 points) Omega Travel competes in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Demand Equation: P 10-Q 4. (Demand Equation) If the fim's marginal cost is a constant $2 per unit, what price will it charge and how many units will it produce if it maximizes its profits? A) $8 and 2 units B) $7 and 3 units C) $6 and 4 units D) $5 and 5 units
(15 marks) Public utilities, like local electricity providers, are likely natural monopolies. They are typically regulated by the government with a rate-of-return regulation. Explain why public utilities like local electricity providers are natural monopolies. Explain the economic rationale behind the rate-of-return regulation on a natural monopoly. Given your above arguments, discuss whether the government should regulate firms other than a natural monopoly with this method.
5) Joe's Service Division Joe runs the Service Division for a car dealership. The overall dealership has profit of $10 million on sales of $100 million and costs of $90 million. Joe's division contributed $9 million in sales and $7 million in costs. If the Service Division is evaluated as a profit center, what dollar amount is most relevant to Joe? $7 million $10 million $2 million $9 million
28. (Figure: Competitive Firm Cost Curves) Refer to the figure. Calculate the profit of this firm. MC Price $10 $8 $7 a. $435 b. $405 c. $270 d. $290 90 AC MR 135 145 160 Quantity
22. Monopolistic competitive firms are productively inefficient because production occurs where: A) Marginal cost is greater than marginal revenue B) Marginal cost is less than marginal revenue C) Average total cost is greater than the minimum average total cost D) Average total cost is less than the difference between average total cost and average variable cost
C3. Monopolistic Competition i. Discuss the main characteristics of the monopolistically competitive market structure. (*- ii. Explain the short-run and long-run profit-maximizing behaviour of a monopolistic competitor. iii. Graphically illustrate (on one graph) the long-run equilibrium of a perfectly competitive firm and a monopolistically competitive firm when they share the same cost structure. Define and explain the types of inefficiencies associated with monopolistic competition. (
4. (6+6+6+6+6+6 points) The graph below displays the short-run average variable cost (AVC), the short-run average total cost (ATC), and the marginal cost (MC) curves of a company Y which produces a homogenous product in a perfectly competitive industry. The vertical axis shows cost while horizontal axis shows the level of output. Suppose that the equilibrium price is equal to $30. MC ATC $40 $38 $30 AVC $20 $15 35 40 Output i. Using the graph above, find the profit-maximizing output of Y in the short-run and marginal revenue at this output. ii. Using the graph above, find the total fixed cost of Y. What is the average fixed cost when Y produces 40 units of output? Cost
6
2. (20 points) A stocker plans to purchase calves (X) at $600 a head to feed and sell later to the feedlot. Feed will cost 2X? and other costs will be 40X. They can be sold to the feedlot at $800 a head. What is the optimal amount of calves that will maximize profit? Check your answer.
2. (Market segment) In a monopoly market, the producer has a cost function of: C = 5+3q, there are two different types of consumers, they have different demand functions: p1 = 15-qı, P2=25-2y2.| a. If the monopolist can conduct the third-degree price discrimination, i.e. he can charge different price to different types of consumers, what is the price he will charge on each market? What is the quantity sold on each market? What is the total profit? b. If the monopolist cannot conduct third degree price discrimination, i.e. he cannot distinguish between the consumers but decide to charge a single price, what is the price he will charge? What is the quantity sold? What is his profit in this case?
10. (Perfect Price Discrimination) Why is the perfectly dis- criminating monopolist’s marginal revenue curve identical to the demand curve it faces?
7. (Figure 10.5) Suppose that a firm offers customers either (1) the ability to buy any quantity they desire for $24 per unit or (2) a price of $18 per unit for 15 or more than under the $24-per-unit pricing scheme, so the plan to charge these types of consumers a price of units. Consumer surplus under the quantity discount is $24 per unit is compatible. Price (S) 40 30- 24- 20 18 10- TTTT 6 8 10 12 14 16 18 20 22 Quantity 11 15 O $64 more; incentive O $32 less; not incentive O $53 less; incentive O $41 more; not incentive

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