Assume a market consists of two upstream firms, and they are sole suppliers of their respective products. Each of these monopolists sell at a linear price to one downstream duopolist each. What would be the effect of vertical integration (so that each upstream monopolist owns its retail outlet) on the final good price?
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Assume a market consists of two upstream firms, and they are sole suppliers of their respective products. Each of these monopolists sell at a linear
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- Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200− Q A − Q B where Q A and Q B are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TC A =1,500+55 Q A + Q A 2 TC B =1,200+20 Q B +2 Q B 2 Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at . Similarly, Company B will produce units and sell at . At the optimum output levels, Company A earns total profits of and Company B earns total profits of . Therefore, the total industry profits are . At the optimum output levels, the marginal cost of Company A is and the marginal cost of Company B is . The following table shows the long-run equilibrium if the firms act independently, as in the Cournot model…Imagine any market divided by 2 Cournot oligopolists who have identical costs Marginal cost = Average cost = 200. About this market, ask yourself: a) If the demand curve for this market is given by Q = 1250 - 2.5P, where Q is the total quantity demanded in the market and P is the selling price, both given in units, what is the reaction curve of the oligopolists? b) What will be the quantity produced and the selling price of the oligopolists? c) A strategist considers that a good marketing campaign would be able to expand the Demand of this market to Q = 1,500 - 2.5P and that in this way, oligopolists could produce the same amount and make significantly greater profits. Such a campaign would generate a reduction in profits in the order of 70,000. Is it worth making this investment in marketing?The supply chain for Pappy Van Winkle bourbon is characterized by a monopolist upstream producer and a competitive downstream retail sector. Final consumers’ demand for Pappy Van Winkle bourbon is given as: P=140-2Q, where Q is the number of bottles that are purchased each day. The marginal cost of production (i.e., performing the manufacturing function) can be written as: MCM=30+2Q, and the marginal cost of performing the retail function is MCA=20. Suppose that the two firms are not vertically integrated. Construct the final consumers’ demand curve.
- A key difference between monopoly and perfect competition is options: the demand curve faced by a perfectly competitive firm is different than the industry demand curve, but the demand curve faced by the monopolist is the same as the industry demand curve. Perfectly competitive firms have considerably more market power compared to monopolists. Price equals marginal revenue for a monopolist, but not for a perfectly competitive firm. the demand curve faced by a monopolist is different than the industry demand curve, but the demand curve faced by a perfectly competitive firm is the same as the industry demand curve.A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 90 - Qa' and the Japanese inverse demand function is P₁ = 80 - 2Qj, where both prices, På and p₁, are measured in dollars. The firm's marginal cost of production is m = $25 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $ (round your answer to the nearest penny) The equilibrium price in the U.S. is $. (round your answer to the nearest penny)Question III (20 points): Consider the case of two natural monopolists for two different products, with identical long-run average costs and identical horizontal long run-marginal costs. The first monopolist faces a relatively inelastic demand, and the second monopolist faces a relatively elastic demand. Both demands, however, share the same vertical intercept. Explain the following, showing the justification to your explanation with properly labeled graphs (use a separate graph for each of a and b below): a. Which monopolist is the less likely target for government regulation? Why? b. If the government considers making both products a "public good" produced by the monopolists. Which product will place a heavier burden on the government's budget?
- Consider any market that has an inverted demand curve given by P = 200-0.6Qd, where P is the market price and Qd is the quantity demanded. Whatever the market structure, it is known that the production of this good takes place through Cmg = CVme= $80.00. Consider that the production of this market can be done by a monopolist company or by two duopolists. If it is a duopoly, the companies will organize themselves as a Stackelberg duopoly and will each have a fixed cost of $1,500.00. If it is a monopoly, this company will have a lot of expenses with licenses with the government, as it is the only one to explore the resource. In this way, your fixed costs would reach $5,000.00. Given this information, evaluate the best balance for this market, from the point of view of consumers.A monopoly sells its good in the U.S. and Japanese markets. The American inverse demand function is Pa = 120-Q₂. and the Japanese inverse demand function is P₁ = 100-2Q₁ where both prices, p, and p,, are measured in dollars. The firm's marginal cost of production is m = $20 in both countries. If the firm can prevent resales, what price will it charge in both markets? (Hint: The monopoly determines its optimal (monopoly) price in each country separately because customers cannot resell the good.) The equilibrium price in Japan is $. (round your answer to the nearest penny)we had two buyer types for pharmaceuticals. One with inverse demand P = 8 – 0.25Q, and one with inverse demand P = 4 – 0.1Q. Marginal cost of the monopolist was constant and equal to 2. If the monopolist cannot price discriminate (so they charge a single price to everyone), show whether their profits are higher serving only the high demand market, or serving both markets. Show whether consumer surplus is higher or lower with or without price discrimination at the monopolist’s optimal solution in either case.
- Suppose that the Department of Justice (DOJ) vetoes all mergers that are likely to lead to an increase in price of the product. The market demand function is given by P(Q) = 50 – Q. Pre- merger, the market is competitive and the cost function is given by C(Q) = 30Q. Post-merger, the market will be controlled by a monopolist and C(Q) = xQ. For what values of x will the DOJ approve this merger?Suppose a monopolist faces two types of consumers: one with demand curve Q1 = 500 – 2P, and the other with demand curve Q2 = 1500 – 3P. Suppose the firm monopolist knows these demand curves but cannot tell the difference between an individual consumer of type 1 versus type 2. They can charge only one price to the aggregate market demand (horizontal sum across quantities of the two buyer types). Construct the market demand curve (it may have a kink), and calculate the monopolist’s optimal quantity and price. Illustrate this on a graph. Do they serve both markets or do they price out the low demand type? Illustrate the monopolist’s optimal second-degree price discrimination strategy on a graph, and calculate the price-quantity bundles offered to the market under this strategy. Assume the monopolist’s marginal costs are constant and equal to 100. Suppose the monopolist can segment the market between the two types directly and engage in price discrimination. What are the monopolist’s…Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200-QA - QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA = 1,500 + 55QA + Q₁² Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at Similarly, Company B will produce At the optimum output levels, Company A earns total profits of $ total industry profits are $ At the optimum output levels, the marginal cost of Company A is $ Cournot Equilibrium Company A Company B Total Industry Selling price The following table shows the long-run equilibrium if the firms act independently, as in the Cournot model (i.e., each firm assumes that the other firm's output will not change). Total industry output Price Output…
