Scenario 2: Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30-Q The marginal cost to produce this new drink is $3. Refer to Scenario 2. What will be the price of this new drink in the long run if the industry is a Bertrand duopoly? OA. $13.50 OB. $9 OC. $12 OD. $3 OE. None of the above D

Scenario 2: Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30-Q The marginal cost to produce this new drink is $3. Refer to Scenario 2. What will be the price of this new drink in the long run if the industry is a Bertrand duopoly? OA. $13.50 OB. $9 OC. $12 OD. $3 OE. None of the above D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Each of the statements below describes a characteristic of the following market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Identify which market structure displays each of the characteristics. (There may be more than one.) a) Each firm produces at Minimum efficient scale (MES) in long-run equilibrium. b) Firms earn profit in long-run equilibrium. c) Each firm produces output where MC=MR. d) Each firm produces output where P=MC. e) There is free entry to the industry
Which of the following is correct for a monopolistically competitive firm in long-run equilibrium? Multiple Choice MC = ATC. MC exceeds MR. P exceeds minimum ATC. P = MC.
Hand written solutions are strictly prohibited
a) Suppose that the two firms engage in Cournot competition. Find the equilibrium price PNE in the industry, the equilibrium outputs QANE and QBNE, as well as the profits πANE and πBNE, for each firm. b) Suppose the marginal cost for firm B increases from $20 to $140, while everything else remains unchanged. Find the new equilibrium price PNE in the industry, the new equilibrium outputs QANE and QBNE, as well as the new profits πANE and πBNE for each firm. c) Suppose that, in addition to the marginal cost increase from $20 to $140 from sub question b), firm B also has a fixed cost of $2500, out of which $2100 may be recouped if it shuts down; everything else remains unchanged. In this case, what will firm B’s optimal output be? (Justify your answer.) What will firm A’s profit be?
evaluate the following statement:“Managers should specialize by acquiring only the tools needed to operate in a particular market structure. That is, man- agers should specialize in managing either a perfectly competitive, monopoly, monopolistically competitive, or oligopoly firm.”
Suppose the tattoo shop market in Richmond is monopolistically competitive. Consider the market from the perspective of one tattoo parlor, Roses & Thorns. Suppose there were positive economic profits in the market and an additional two tattoo parlors enter the market. What happens to the demand curve for Roses & Thorns tattoos shifts up shifts down stays the same
Suppose that a firm produces tennis racquets in a monopolistically competitive market. The following graph shows its demand curve (D), marginal revenue curve (MR), marginal cost curve (MC), and long-run average cost curve (LRAC). Assume that all firms in the industry face the same cost structure. Place the tan point (dash symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place the purple point (diamond symbol) to indicate the point at which this firm would produce in the long run if it operated in a perfectly competitive market. Note: Dashed drop lines will automatically extend to both axes. 100 LRAC 60 50 PRICE, COSTS, AND REVENUE (Dollars per racquet) 8 R 90 MC 10 0 0 10 D MR 50 60 70 80 90 100 20 30 40 QUANTITY (Thousands of racquets per month) Monopolistic Competition Outcome Perfect Competition Outcome Compare the average cost and the output in the long-run equilibrium for a monopolistically competitive…
There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for paving services is ?= 2040 ―20? where quantity is measured in pave jobs per month and price is measured in dollars per job. Assume Asphalt, Inc. has a marginal cost of $100 per driveway and Blacktop Bros. has a marginal cost of $150. Answer the following questions: Determine each firm’s reaction curve and graph it. How many paving jobs will each firm produce in Cournot equilibrium? What will the market price of a pave job be? How much profit does each firm earn?
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…
In comparing an oligopolistic firm to a perfectly competitive firm it is generally assumed that the price charged by the competitive firm will be higher than the price charged by the oligopolistic firm. True or False (Explain)
ou are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost: P<MC, P>ATCP<MC, P>ATC Which of the following statements are true about the firm? Check all that apply. The firm is possibly maximizing profit. The firm is in long-run equilibrium. The firm can increase its profit by reducing its output.
Suppose you manage a firm in a monopolistically competitive market Suppose you manage a firm in a monopolistically competitive market. Which of the following strategies will do a better job of helping you maintain economic profits: obtaining a celebrity endorsement for your product or supporting the entry of firms that will compete directly with your biggest rival? Explain your answer. Suppose you manage a firm in a monopolistically competitive market