Do not use chatgpt. What happens if firms in an industry merge?Suppose the figure to the right represents a perfectly competitivemarket. Then, the firms in the industry merge, forming amonopoly.Use the line drawing tool to draw either a new marginal costcurve (MC2), a new demand curve (D2), or a new marginalrevenue curve (MR2) that shows what happens in the market ifthe newly merged firm is more efficient than the firms wereindividually. Properly label this line.Carefully follow the instructions above, and only draw therequired objects.3028-26-24-Price and cost per unit22-2018-16-14-12-8-6-4-2-N-O2-+4FooS₁ MC+MR₁D₁8 10 12 14 16 18 20 22 24 26Quantity

In a perfectly competitive market, firms are price takers, meaning they cannot influence the market…

Answered: What happens if firms in an industry…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Monopoly

Section: Chapter Questions

Problem 5SQP

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**Practice** Consider a market with three firms. Each firm has a different cost function. We assume C1(q1) = 7q1, C2(q2) = q2 + 1, and C3(q3) = 3q3.
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?
In a market there are five firms, all have a total cost curve equal to CT = 2q. The market demand is Q = 500 - 5P. How much profit would each firm get if they collude and share the market equitably? What is the profit to each firm if they agree to collude, but one firm misleads the others charging a slightly lower price? What is the profit if all firms do not collude and compete via price?
In the model of Bertrand Competition, it been found that firms would compete, driving price down to marginal cost so that firms make zero economic profits. This means there are firms essentially behaving as if they are perfectly competitive, even with just two firms. Despite this very clear prediction, evidence of this outcome is not ofter seen, even in markets where it is believed that firms are indeed competing via price. Why might this be? For instance, what assumptions are made about costs of firms and how might things play out if those assumptions fail? What are some things firms could do in this situation to prevent prices from dropping as low as marginal cost, even if the assumptions on costs are true?
Economics: Industrial Economics Question: In a market that operates under quantity competition there are 2 firms (Cournot duopoly). The inverse demand function is P = A - B Q. The cost structure of firm 1 is given by C1(q1) = F1 + c1 q1 and that of firm 2 is given by C2(q2) = F2 + c2 q2. Prior to competing, the two firms can engage in research at levels (x1, x2) respectively in order to lower their marginal costs. As a result, marginal costs are c1 = c - x1 - β2x2 and c2= C - x2 - β1 X1. where β1 = β2 > ½. Finally, the research costs are F1 = a1 (x1)^2 /2 and F2 = a2 (x2)^2 /2, where a1 > 0 and a2> 0. 1. The Nash Equilibrium research levels are Choices: A. Higher than the cooperative research levels for both firms. B. Higher than cooperative research levels for firm 1 but lower for... C. Lower than the cooperative research levels for both firms. D. Higher than cooperative research levels for firm 2 but lower for... 2. An increase in the value of a2 would Choices: A.…
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Monopoly outcome versus perfectly competitive outcome 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. (graph 1) Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and…
7. A honey farm is located next to an apple orchard and each acts as a competitive firm. Let the number of apples produced be measured by A and the amount of honey produced by H. The cost functions of the two firms are CH (H) = H²/100 and C₁(A)=4-H. The price of honey is £2 and the price of apples is £3. 100 a. If the firms operate independently, what is the equilibrium number of apples and amount of honey produced? Are these amounts the Pareto-efficient? Explain. b. Suppose the two firms merge. What is the profit maximising amount of apples and honey that the merged firm produce? Explain. c. What is the socially optimum amount of honey and apples? Discuss methods to induce the independent firms to produce the socially optimal number of apples and amount of honey. Explain.
7. 2 firms are engaged in Bertrand competition. They each face the following cost curve C(Q) = 3Q² +3. Market demand is representated by D(P) = 50 - P. What is the Bertrand Nash equilibrium? Why is this a Nash Equilibrium?
Back in 2012, the world’s largest provider of chipsets for devices (e.g. smartphones, tablets) running on 4G network signed an agreement with one of the leading device manufacturers, committing to make significant payments to this manufacturer on condition that the manufacturer would exclusively use its chipsets. This was found to be violating competition law. a) Use economic theory to explain why such an agreement violates competition law and can hinder competition in the market. b) If you are working for the chipsets provider, how can you use economic theory to defend your company? (1000 words)
Imagine a small town in a remote area where only two residents, Maria and Miguel, own dairies that produce milk that is safe to drink. Each week Maria and Miguel work together to decide how many gallons of milk to produce. They bring milk to town and sell it at whatever price the market will bear. To keep things simple, suppose that Maria and Miguel can produce as much milk as they want without cost so that the marginal cost is zero. The weekly town demand schedule and total revenue schedule for milk is shown in the table below: Quantity (in gallons) 10 |1 O b. $12 O c. $10 d. S8 2 113 14 לן 16 17 18 19 10 11 12 Price $24 $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Total Revenue (and Total Profit) $0 $22 $40 $54 $64 $70 $72 $70 $64 $54 $40 $22 $0 Refer to Table 17-3. Suppose the town enacts new antitrust laws that prohibit Maria and Miguel from operating as a monopoly. What will be the price of milk once Maria and Miguel reach a Nash equilibrium? a. $14
Mavi and Diesel both make basic blue jeans. The demand curves for the two firms are given by Qm=135,000−3000Pm+1200Pd Qd=154,000−4000Pd+1000Pw suppose it is a price equilibrium for Mavi to set a price of $30 per pair of jeans and Diesel to set a price of $25. What is marginal cost for Mavi What is marginal cost for Diesel

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