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Illustrate and explain how equilibrium is determined in an olipolistic market.
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- 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 auto industry in the U.S. has long been dominated by the Big Three carmakers: Ford, General Motors, and Chrysler. The auto industry in China, on the other hand, has more than 170 carmakers. Automakers in the U.S. have some monopoly power while the car market in China has the characteristics of a perfectly competitive market. Based on these differences in market characteristics, explain how car makers in the U.S. will “behave” compared to carmakers in China. In particular, address the following considerations: How will the profits of carmakers in the U.S. compare to the profits of carmakers in China, everything else being equal?Juanita owns a plot of land in the desert that isn't worth much. One day, a giant meteorite falls on her property, making a large crater. The event attracts scientists and tourists, and Juanita 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 (D) curves and marginal revenue (MIR) curves for the two markets. Juanita's marginal cost of providing admission tickets is zero.
- ?There are prime examples about duality where one producer waits for another to produce and change their pricing. For example, Boeing and Airbus. Airbus announced that they will start producing the A380 which is one of the largest passenger carriers in the world. Boeing immediately announced the production of Boeing dream liner 787 which is comparable to the A380. When the prices came out, A380 were forced to reduce their prices to be close to the 787. The question I want to ask is why not have one of the companyâs focus their efforts on the smaller jets and leave the other market to the other competitor? Doesn’t that allow them to be monopolists in their fields and eventually increase the prices?Spike the Bulldog is the only seller of Zagopoly board games in Spokane. The inverse demand curve for this game is given by P = 40 – 0.5Q, where Q is in hundreds of games per month. Spike's marginal cost of producing board games is 7 + 0.1Q. a. If Spike cannot price-discriminate, what is his profit-maximizing level of output? What is his profit-maximizing price? b. How much consumer surplus will buyers of the board game receive? How much producer surplus will end up in Spike's pockets? How much deadweight loss is created by the board game monopoly? c. Suppose Spike is a magnificent salesman, able to discern perfectly his customers' willingness to pay. If he leverages this information to begin perfectly price discriminating, how many board games will he sell? d. How much surplus will buyers receive from a perfectly price- discriminating Spike? How much producer surplus will Spike capture? What will the deadweight loss due to monopoly be?Suppose in Cape town there is only one producer of Wine knowns as Cape Town Wines. Cape Town Wines is well-trusted by the government since it had been producing wines for centuries that offer indigenous flavour. In 2022, the government decides to allow free international trade so that its citizens can now enjoy more varieties of wine. However, the government is worried about its action on Cape Town Wines. The figure below offers the market structure for wines in Cape Town Price Demand X Pworld MC Quantity Suppose Mary an economist suggests to the Minister of trade to implement a quota that will yield the same import level as provided for by a tariff. Using a diagram analyse the effects of the quota implementation. Clearly indicate the domestic production, imports, price level, consumer surplus, producer surplus and government revenue.
- Suppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 120 - 3Q. The marginal cost for each firm is €12. Calculate the level of output that each firm would produce at the Cournot equilibrium.Plesco is planning to establish a subsidiary in the US. This subsidiary will employ up to 50 workers, will have an office and a special storage for laptops. When designing the corporate form of the subsidiary Plesco wishes to limit its own liability so that the subsidiary is fully liable for all debts and obligations before its clients. At the same time, Plesco does not want this subsidiary to become a public company –- all shares should belong to Plesco so that Plesco could exercise full control. In addition, Plesco does not want a complicated organizational structure. An optimal tax regime would also be preferable for the owners of Plesco. One of the Plesco's plans includes registering a trademark “Plesco" for laptops. As laptops are the company's most successful product, Plesco is not planning to sell anything else in the US. However, having monitored the market, Plesco found that a trademark "Plesco" had already been registered for chocolates by USPTO. The owner of trademark in the…how do sunk costs create a barrier to entry into the market place?
- The auto industry in the U.S. has long been dominated by the Big Three carmakers: Ford, General Motors, and Chrysler. The auto industry in China, on the other hand, has more than 170 carmakers. Automakers in the U.S. have some monopoly power while the car market in China has the characteristics of a perfectly competitive market. Based on these differences in market characteristics, explain how car makers in the U.S. will “behave” compared to carmakers in China. In particular, address the following considerations: How will carmakers in the U.S. respond to consumers’ desires compared to Chinese carmakers’ response to consumers’ desires, everything else being equal?Why can it be difficult to decide what a “market” is for purposes of measuring competition?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. PRICE (Dollars per hot dog) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 20 40 Perfectly Competitive Market S=MC D 60 80 100 120 140 160 180 200 QUANTITY (Hot dogs) PC Outcome A Consumers' Surplus Producers' Surplus Assume that one of the hot dog vendors successfully lobbies the city council to…