The graph shows the demand curve for cars in 2017. Suppose that the least-possible cost of producing a car is $10,000 and that the efficient scale is 10,000 cars a month. Draw the average total cost curve for a car manufacturer in 2017. Label it. The graph shows that the market for cars is a natural oligopoly with O A. 1 firm B. 2 firms C. 3 firms O D. 4 firms

The graph shows the demand curve for cars in 2017. Suppose that the least-possible cost of producing a car is $10,000 and that the efficient scale is 10,000 cars a month. Draw the average total cost curve for a car manufacturer in 2017. Label it. The graph shows that the market for cars is a natural oligopoly with O A. 1 firm B. 2 firms C. 3 firms O D. 4 firms

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges a low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earns profits of $30. if one firm charges a high price and the other firm charges a low price, the firm that charges the lowest price earns profits of $50 and the firm charging the highest price earns profits of zero. a. Write this game in normal form. b. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate if 50 percent?
5. Duopolist firms 1 and 2 compete on price with some market differentiation. Demand for firm ie{1, 2} is q, = 2 – 2p, + p, Neither firm has costs. a. Find the best response functions for each firm in the static game. b. Find the unique Nash equilibrium prices in the static game. c. Are prices strategic complements or strategic substitutes? Briefly explain. d. Does Firm 1 want Firm 2 to increase or decrease p,?
12. Consider a duopoly market. Two firms are selling identical products and all costs are assumed to be zero for simplicity. Market demand schedule is given in the following table. Note that firms always choose an integer value for the quantity of production. Quantity Price Total Profit 3 $12 4 11 5 8 6 6. 7 4 8 2 1 10 a. Fill in the column of total profit.
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Coke and Pepsi dominate the cola market. Suppose that the marginal cost of making cola is $2. Assume also that the demand for cola is given by the following table: Price $8 7 6 5 4 3 2 1 Quantity 5 cans 6 7 8 9 10 11 12 Suppose Coke and Pepsi both supply cola. They form a cartel and agree to cooperate on how much soda to produce. In this cartel case, how many bottles of cola would be sold? Type your answer...
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