An industry has two firms-aStackelberg leader and a follower.Both firms have the same constantmarginal cost MC=2, producepositive amounts and compete inquantities (Cournot competition).Who will produce more?Select one:a. The follower will producemore.○ b. Both will produce the samesince they both have MC= 2.○ c. The leader will producemore.○ d. Cannot tell with theinformation given above.○ e.e. None of the options.

In a Stackelberg competition model, the leader firm makes its production decision first, and the…

Answered: An industry has two firms-a Stackelberg…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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According to Mankiw, the two characteristics perfect competition, monopolistic competition, and monopoly have in common are Question 10 options: a) quantity produced is where MR = MC ; could earn economic profit in the long run b) quantity produced is where MR = MC; cannot earn economic profit in the long run c) Quantity produced is where MR < MC ; could earn economic profit in the long run d) Quantity produced is where MR > MC; cannot earn economic profit in the long run
According to Mankiw, the two characteristics perfect competition, monopolistic competition, and monopoly have in common are Question 10 options: a) quantity produced is where MR = MC ; could earn economic profit in the long run b) quantity produced is where MR = MC; cannot earn economic profit in the long run c) Quantity produced is where MR < MC ; could earn economic profit in the long run d) Quantity produced is where MR > MC; cannot earn economic profit in the long run
A shoe store in a monopolistically competitive market has a demand curve for their shoes given by P = 81-0.5Q. The variable costs of producing a shoe are given by the equation VC = Q2 + 3Q and so the marginal costs are MC = 20 +3. a) What is the shoe store's profit - maximizing output and price? If the shoe store is in a long-run equilibrium, what must its fixed costs be?
True or false: In a perfectly competetive market, when AVP<P<ATC, a firm will not produce any output to minimize its costs. Explain why using a graph.
McDonald's is a fast-food restaurant chain. Which of the following would be a long-run decision for McDonald's? O hire one more worker in a restaurant location O ) replace the manager of a restaurant. Oopen a new restaurant in a city O supply more hamburgers in one restaurant MacBook Pro F8 80 F7 F6 F5
Question 4 Many companies reward their managers based on profits so that the managers will make decisions to maximize profits. However, some companies are paying their managers based on sales or revenue, instead of profits, so their managers will make decisions to maximize revenue. For example, at Reebok, the former CEO Paul Fireman received a nickel for every pair of shoes sold. a. Suppose that there are two existing firms in the market competing in quantity. Ignore market uncertainty and long-run competition. Firm B's manager is always paid based on firm B's profits. Firm A has been paying its manager based on profits but now changes to pay the manager solely based on revenue. Each manager chooses the production level (quantity) for his firm simultaneously. Is it possible for the above change in firm A's compensation system to increase firm A's profits? What are the direct effects and strategic effects on firm A's profit? Explain. Direct Effect (Circle one): Positive Negative…
*You only need to answer question D*
Suppose Eckerd Pharmacy is the only pharmacy in a particular market, but CVS Pharmacy is thinking about entering the market. Absent entry, Eckerd Pharmacy can maximize profits by producing a small quantity. However, by producing a large quantity, Eckerd Pharmacy can attempt to deter entry by reducing prices and, consequently, profits. Eckerd Pharmacy must choose how much to produce first and then CVS Pharmacy will choose whether to enter the industry. The strategies and corresponding profits for Eckerd (E) and CVS Pharmacy (C) are depicted in the decision tree to the right. What is the Nash equilibrium of the game? OA Eckerd Pharmacy will choose the small quantity and CVS Pharmacy will not enter OB. Eckerd Pharmacy will choose the large quantity and CVS Pharmacy will enter. C. Eckerd Pharmacy will choose the large quantity and CVS Pharmacy will not enter. OD. Eckerd Pharmacy will choose the small quantity and CVS Pharmacy will enter Small Quantity, Large Quantity U Enter Stay Out Enter…
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Consider a homogeneous-product duopoly where each firm initially produces at a constant marginal cost of $200 and there are no fixed costs. Determine what would happen to each firm’s equilibrium output and profits if firm 2’s marginal cost increased to $210 but firm 1’s marginal cost remained constant at $200 in each of the following settings: a. Cournot duopoly. b. Sweezy oligopoly.
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Economies of scale are the defining characteristic for which of the following? * perfect competition oligopoly monopolistic competition game theory O natural monopoly

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