tion Table B. A Smalltown has 150 residents and two pizza stores: domino's pizza and pizzahut. Each firm's costs: FC = $0, MC = $10. The market demand is represented by the following table. Price Quantity Profit (Price - MC) x Quantity 40 30 35 45 30 60 25 75 20 90 15 105 10 120 5 135 0 150 Refer to Table B. What is the Nash Equilibrium? each store makes 75 pizza and charges $25 each store makes 45 pizza and charges $20 each store makes 90 pizza and charges $20 each store makes 35 pizza and charges $25

tion Table B. A Smalltown has 150 residents and two pizza stores: domino's pizza and pizzahut. Each firm's costs: FC = $0, MC = $10. The market demand is represented by the following table. Price Quantity Profit (Price - MC) x Quantity 40 30 35 45 30 60 25 75 20 90 15 105 10 120 5 135 0 150 Refer to Table B. What is the Nash Equilibrium? each store makes 75 pizza and charges $25 each store makes 45 pizza and charges $20 each store makes 90 pizza and charges $20 each store makes 35 pizza and charges $25

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 16CTQ: Would you rather have efficiency or variety? That is, one opportunity cost of the variety of...

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Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, What is the right amount of variety? Can there be too many varieties of shoes, for example?
May and Raj me the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the com. If they work independently, they will each earn 100. If they decide to work together and both lower their output, they call each earn 150. If one person lowers output and the other does not, the person who lowers output will earn $1 and the other person will capture the entire market and will earn 200. Table 10.6 represents the choices available to Mary and Raj. What is the best choice for Raj if he is sole that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoners dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output. (Each results entry lists Rajs earnings first, and Marys earnings second.)
Some years ago. two intercity bus companies, Greyhound Lines, Inc. and Trailways Transportation System, wanted to merge. One possible definition of the market for this case was the market for intercity bus service. Another possible definition was the market for intercity transportation, including personal cars, car rentals, passenger trains, and commuter air flights.' Which definition do you think the bus companies preferred, and why?
Why is a production possibilities frontier typically drawn as a curve, rather than a straight line?
A firms marginal cost curve above the average variable cost curve is equal to the films individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the films individual supply curve if marginal costs increase?
Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not?
Think back to a purchase that you made recently. How would you describe your thinking before you made that purchase?
Aside from advertising, how can monopolistically competitive films increase demand for their products?
What is productive efficiency? Allocative efficiency?
Look at Table 8.13. What would happen to the films profits if the market price increases to 6 per pack of raspberries?
If you were developing a product (like a web browser) for a market with significant barriers to entry, how would you try to get your product into the market successfully?
Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as the incumbent tries to bleak into the market by selling 4,000 units of output. Estimate from the graph what the new firms average cost of producing output would be. If the incumbent continues. to produce 6,000 units, how much output would the two films supply to the market? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn? Figure 9.2 Economics of Scale and Natural Monoploy