Answered: The tables (below) show the willingness…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The tables (below) show the willingness to pay by three (competitive) consumers for additional units of some good, and the marginal costs of three (competitive) firms that produce that good.

a) Compute the competitive equilibrium quantity and price for this market. Also, compute each consumer's surplus and each firm's profits.

b) Now suppose that you have access to the same technology (and competitive input markets) as that of Firm 3. Entering the market (that is, launching a fourth firm) means a fixed (yes, sunk too) cost of $10. Would you decide to enter? (Entry has effects on the market, of course.)

c) With the same data, suppose that all three firms merge. That is, now a single corporation controls (and decides on output for) all three firms (now, plants of one single firm). Obtain the output (or, equivalently, the price) that this monopolistic corporation will choose, and evaluate the consequences for the consumers (that is, the effect on the consumer surplus) and for the profits of the industry.

2.- The tables (below) show the willingness to pay by three (competitive) consumers for additional units
of some good, and the marginal costs of three (competitive) firms that produce that good.
UNITS
1
2
3
4
5
6
7
FIRM 1
$3
$4
$5
$6
$8
$9
$10
FIRM 2
$1
$3
$4
$7
$9
$10
$11
FIRM 3
$2
$4
$6
$8
$9
$10
$12
UNITS
1
2
3
4
5
6
7
MR A MS B
$15
$11
$12
$9
$10
$8
$9
$8
$5
$4
$7
$5
$3
$2
a) Compute the competitive equilibrium quantity and price for this market. Also, compute each
consumer's surplus and each firm's profits.
MS C
$18
$13
$11
$9
$8
$5
$4
b) Now suppose that you have access to the same technology (and competitive input markets) as that of
Firm 3. Entering the market (that is, launching a fourth firm) means a fixed (yes, sunk too) cost of $10.
Would you decide to enter? (Entry has effects on the market, of course.)

3.-With the same data as in problem 2, suppose that all three firms merge. That is, now a single
corporation controls (and decides on output for) all three firms (now, plants of one single firm). Obtain
the output (or, equivalently, the price) that this monopolistic corporation will choose, and evaluate the
consequences for the consumers (that is, the effect on the consumer surplus) and for the profits of the
industry.

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