Blue Origin must decide about entering the space travel market but ignores if SpaceX, the monopolist in the sector, is efficient or not. If SpaceX is efficient, it has zero marginal costs and gains 18.8 in a monopoly and 6.3 in a duopoly. If it is inefficient, its marginal costs increase to 5 and gains are 8.3 in a monopoly and 4 in a duopoly. Should Blue Origin enters the market, it would gain 27 if SpaceX is inefficient and lose 3.8 otherwise. The demand function is p = 15 - 3*q. To signal its nature in the first period, SpaceX should produce

Blue Origin must decide about entering the space travel market but ignores if SpaceX, the monopolist in the sector, is efficient or not. If SpaceX is efficient, it has zero marginal costs and gains 18.8 in a monopoly and 6.3 in a duopoly. If it is inefficient, its marginal costs increase to 5 and gains are 8.3 in a monopoly and 4 in a duopoly. Should Blue Origin enters the market, it would gain 27 if SpaceX is inefficient and lose 3.8 otherwise. The demand function is p = 15 - 3*q. To signal its nature in the first period, SpaceX should produce

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 10.10. The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why there are barriers to entry in pure monopoly. a monopoly has a perfectly elastic demand curve. marginal revenue is less than average revenue. total revenues are greater than total costs at the profit-maximizing level of output.
A profit-maximizing monopolist sells its goods to two different countries. In one country it faces demand as p1 180 – 2q2. Its marginal cost is 2qi. If the monopoly were to charge different prices in these markets, in which market it can charge a higher price, explain using elasticity. Calculate CS, PS, and DWL. What would be the price if the firm were to 120 – q, and in other country it faces demand as P2 charge one price for both markets.
Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the…
Question C2 The Australian Competition and Consumer Commission (ACCC) has opened an investigation regarding collusion between the two major firms producing fire protection gear for bush firefighters. The firms - Azure Associates and Blue Guard - contend that they are quantity competitors and that the prices they are charging are a result of an increase in price by their suppliers. As part of the case, the ACCC has noted that the Australian firefighters typically purchase their own protective gear and are thus price takers in the market. Both the ACCC and the two firms under investigation agree that the market demand can be described by the inverse demand function: P(Q)=240-Q, where Q is the total quantity provided by the two firms (i.e., Q=q₁ + 9B, where is the 9A amount produced by Azure Associates and q, is the amount produced by Blue Guard). All parties also agree that the two firms have identical production technologies and that the two firms have the same constant marginal cost of…
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if two groups have the same price elasticity of demand, third-degree price discrimination(i.e. charging the two groups different prices) will reduce the monopolists profits relative to not price discriminating. 1.true 2.false
Suppose that a hospital monopolizes the local market for heart surgery, charging $10,000 per procedure. The hospital does 1000 heart surgeries annually, and the cost of heart surgery is $5000 per procedure. The hospital is a duopolist in the market for cataract surgery. The hospital and its competitor both perform 2,000 cataract procedures annually, charge $2000 per procedure, and have costs of $1,000 per procedure. The hospital plans to go to insurers and offer a bundled price. It will discount the price of heart surgery below $10,000 and hold the price of cataracts at $2,000, provided that it is given exclusivity in the cataract market. What price for heart surgery must the hospital charge to insure that its competitor cannot profitably compete in the cataract market? (Assume that the hospital would match its rival’s price in the cataract market if the rival were to respond to this bundling arrangement by cutting its cataract price).
The graph at right depicts a monopolistically competitive firm in the long run. Assume the firm exhibits profit-maximizing behaviour. Monopolistically Competitive Firm This firm's excess capacity is units. (Enter your response rounded to the nearest whole number.) MC 34 LRAC 24 MR : D 8 16 20 26 Output Dollars per Unit
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