A market has many small firms and one dominant firm. The market demand is Q = 100 - 5P. The dominant firm has a constant marginal cost of $6. All the smaller fringe firmscombined have a supply curve given by Qe = 4P -8.The dominant firm sets the market price, and the fringe firms act as price takers. The dominant firm allows the fringe firms to sell as many units as they want at the price set bythe dominant firm. The rest of the market is then supplied by the dominant firm.units, and the price it charges is $(Enter your responses as integers.)The profit-maximizing quantity produced by the dominant firm is

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Answered: A market has many small firms and one…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 50 45 PC Outcome 4.0 635 3.0 2,5 + 20 15+ 10 05+ 45 90 116 100 225 270 315 360 405 450 QUANTITY (Hot dogs) PRICE (Dolere per hot dog)
consider a market with inverse demand P(Q) = 10 − Q and two firms with cost curves C1(q1) = 2q1 and C2(q2) = 2q2 (that is, they have the same marginal costs and no fixed costs). They compete by choosing quantities. Suppose that Firm 1 chooses quantity first and is able to credibly commit to this choice. Then firm 2 choose its quantity after observing firm 1’s quantity. In the SPNE of this game, what is the price faced by consumers?- p = 3- p = 4- p = 5- p = 6- p = 7
In competitive markets, there are many small firms with each firm unable to influence the market price. Suppose company ABX operates in the wheat market. The company produces and markets wheats at a Price = $20 per container. The firm’s total costs are given as: TC = 50 +2Q + 3Q2 Find the Firm’s marginal cost? Show your steps, including graphs. Review additional resources? Hint: See the rules for differentiation
A dominant or price setting firm and several smaller price takers serve a market where total market demand is Qd = 700 – 3P and the combined supply from all the smaller firms is Qs = - 20 + 2P. State the dominant firm’s marginal revenue function (MRf), and use it to determine its profit maximizing quantity and the price (P) it will set for the market if MC = $56.
The firm ACME, Inc. operates in a competitive market because OACME, Inc. is one of a few firms and entry in this market is easy OACME, Inc. can influence the market price and sells a product different from other firms in the market OACME, Inc. is one of many firms selling the same product and, market entry is easy OACME, Inc. is one of many firms selling the same product and, market entry is blocked
Consider a firm that has one factory, but can sell its product in two observably different markets, engaging in third-degree price discrimination. You may assume that the good produced is continuously divisible (like ethanol). The firm has a monopoly in market 1 and faces market demand curve Q1(P) = 100 – 2P and the firm also sells its product in market 2 which is competitive and has market price P2 = $30. The firm has cost function C(Q) = 0.25Q2 with marginal cost equal to MC(Q) = 0.5Q, where Q = Q1 + Q2 is the total quantity it produces: Q1 is the quantity to be sold in market 1 and Q2 is the quantity to be sold in market 2. a) Write out the firm’s profit maximization problem. b) Give the marginal conditions (equations) that a solution to the profit maximization problem satisfies. c) Solve for the firm’s optimal quantities to sell in each market. d) Give the price that the firm optimally charges in each market
Eric owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on his property, making a large crater. The event attracts scientists and tourists, and Eric decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show daily demand (DD) curves and marginal revenue (MRMR) curves for the two markets. Eric's marginal cost of providing admission tickets is zero. PRICE (Dollars per ticket) 20 18 16 9 09 2 0 0 1 Market A MR 2 3 4 5 6 7 8 QUANTITY (Admission tickets) Pricing Policy Nondiscriminatory Discriminatory D 0 10 Total Revenue (Dollars) PRICE (Dollars per ticket) 20 18 18 14 12 10 8 4 2 0 0 1 low Market B Imagine that at first, Eric charges the same price of $8 per admission in both markets so that the total number of admissions demanded is Tickets. Imagine now that Eric decides to charge a different price in each market. To maximize revenue, Eric…
C2) Consider an industry with only two firms: firm A and firm B. The industry's inverse demand is P(Q) = 400 - ¹1/Q, 10 where P is the market price and Q is the total industry output. Each firm has a marginal cost of $10. There are no fixed costs and no barriers to exit the market. a) Suppose that the two firms engage in Cournot competition. Find the equilibrium price PNE in the industry, the equilibrium outputs QANE and QBNE, as well as the profits NEA and NEB for each firm. marks] b) Suppose the two firms engage in Stackelberg competition, with firm A moving first, and firm B moving second. Find the equilibrium price PS in the industry, the equilibrium outputs QS and QBS, as well as the profits π and TSB for each firm. в c) For this subquestion only, suppose that firm B has a fixed cost of $200 000: What will firm B's optimal decision be, and what will be the resulting market structure? Now assume that instead of having two firms in the market, we have a monopoly facing the inverse…
PROBLEM (5) In a dominant firm market with demand Q = 30 − p, the dominant firm has MC(Q) = 2Q (that is, with TC(Q) = Q^2) and the fringe is composed of 5 identical firms, each with MC(Q) = 10Q (that is, with TC(Q) = 5Q^2). (a) Calculate the market price in the dominant firm model. Calculate the quantity produced by the fringe. (b) Now assume that the 5 fringe firms form a “union”, and act as 5 “plants” of the union firm and this union firm competes as one single firm against the dominant firm in quantities, as in Cournot competition. What is the Cournot-Nash equilibrium price and quantity in this market organization? (c) Now, the dominant firm convinces the “union” not to compete with it but instead collude (to maximize the sum of profits) to form a cartel. What is the market price and quantity? (d) Back to the problem description. If all the firms (the dominant firm and the 5 fringe firms) acted as price takers, as in the perfect competition, what would be the market equilibrium…
Three firms sell identical products in a market with inverse demand given by P(Q) = 590 - 4Q, where Q = q1 + q2 + q3, i.e., the sum of all quantities produced by all three firms. Each firm has a constant marginal cost of production MC = 18 and no fixed cost. Firm 1 chooses q1 first. Firms 2 and 3 simultaneously choose q2 and q3 after observing q1. Calculate the subgame perfect equilibrium profit of firm 2.
Monopoly outcome versus perfectly competitive outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run perfectly competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Use the green point (triangle symbol) to shade the area that represents consumers’ surplus, and use the purple point (diamond symbol) to shade the area that represents producers’ surplus. (graph 1) Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and…
Suppose that there are two types of firms in a perfectly competitive market. Firms of type A have costs given by CA(q) = 30q2 + 10q. Firms of type B have costs given by CB(q) = 50q2 + 10. ( dCA dq = 60q + 10 and dCB dq = 100q). There are 60 firms of type A and 100 firms of type B. Derive the individual firm supply functions for each type of firm and What is the range of prices in which some firms produce but others do not? Are there prices at which no firms produce Why?

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