Explain, using graphs, how the equilibrium in an industry in the Krugman's model changes when the size of the market increases (perhaps by economic integration).
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Explain, using graphs, how the equilibrium in an industry in the Krugman's model changes when the size of the market increases (perhaps by economic integration).
Equilibrium in an industry in the Krugman's model changes when the size of the market increases. It is explained with the help of a figure as shown below.
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- consider a market with a large number of firms, an upward sloping supply curve S0, and a downward sloping demand curve D0. We will start with the assumption that the market is perfectly competitive; hence, the supply curve S0 is the sum of the marginal cost curves of all the firms. Assume the market is perfectly competitive. Indicate the original competitive equilibrium price P0, equilibrium quantity Q0, the resulting Consumer Surplus CS0, the resulting Producer Surplus PS0, and the “socially optimal” output (the output the Benevolent Dictator would choose) QSO on your graph. Graphically indicate the size of Dead-Weight Loss DWL0 if there is such a loss. Question - Now suppose that scientists discover that this particular product has a significant Positive Externality. The Demand curve is a depiction of marginal private benefit (MPB). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (MSB) is higher than Marginal…Evaluate the perfect competition market structure as a benchmark against which the functioning of all other types of market structures can be compared in terms of allocative efficiency and productive efficiency. Please provide diagrams with this answer.Homework 3 B. Dominant firm model questions Assume a market of a crude oil market. The world demand and the supply equations for OPEC (Price leader) and shale (follower) oil producers are as shown below: Qworld.D = 150 – 3P, MCOPEC = 5+ 0.4Qs.OPEC MCSHALE = 30 + Qs.SHALE 1. Find the market price 2. Find the market quantity supplied by OPEC and market quantity supplied by Shale 3. Find the profit of OPEC and profit of Shale oil producers
- Which of the following products/markets is most consistent with the perfect competition model? Apple iPhones a bustling farmers' market Kellogg's Frosted Flakes electric utilities automobiles 2 Adam Smith’s “invisible hand” refers to The mechanism that moves market price and quantity to equilibrium The natural tendency of markets to avoid monopolies and ensure competition The market’s incentive to lower price in order to increase quantity sold The lack of government role in the free market due to the market’s ability to self-regulate The tendency of firm’s to seek to merge in order to realize synergies and market dominance 3 A company facing inelastic demand for a product sees an increase in its costs after a worker strike forces a wage increase. What is likely to happen to the price and quantity sold of that product? Price will fall slightly while…Short Answer 1 Fill in the table below. Number of firms Type of product Influence over price Barriers to entry into markets Perfect competition Market structure Monopolistic competition Oligopoly Monopoly Short Answer 2 In the long run, do perfectly competitive markets satisify technical efficiency, allocative efficiency, and economic efficiency? Explan your reasoning for each.Firms in an oligopoly do not choose to compete in price. Which model is used to explain nonprice competition? Draw a graph and explain briefly.
- Consider the weekly market for.gyros in a popular neighborhood close to campus. Suppose this market is operating in long-run competitive equilibrium with many gyro vendors in the neighborhood, each offering basically the same gyros. Due to the structure of the market, the vendors act as price takers and each individual vendor has no market power. The following graph displays the supply (SMC) and demand (D) curves in the weekly market for gyros. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. PRICE (Dollars per gyro) 5.0 4.5 4.0 Competitive Market 3.5 S=MC 3.0 2.5 2.0 1.5 1.0 0.5 D 0 0 50 100 150 200 250 300 350 400 450 500 PC Outcome (?)Suppose that we check the news headlines and see “Firms in China and India are both considering entering into the US Automobile Market”. Use the Diamond Model to make a case for the success or failure of those firm in the US Auto Marke.The first step to gain and sustain a competitive advantage is to Select one: A. develop functional and business-level strategies. B. put the guiding policies of a firm into practice. C. understand the strategies of the competitors. D. define a firm's vision, mission, and values.
- 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.Many economists would argue that there is no such thing as perfect competition in the real world. What limitations to that theory would support their argument?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…
