Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 17SQ
To determine
The market equilibrium in the cartel.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Consider the following Cournot model.
• The inverse demand function is given by p = 30 –Q, where Q
qi + q2.
Firm 1's marginal cost is $6 (c1 = 6). Firm 2 uses a new
technology so that its marginal cost is $3 (c2 = 3). There is no
fixed cost.
%3D
The two firms choose their quantities simultaneously and
compete only once. (So it's a one-shot simultaneous game.)
QUESTION 3
Consider the following three versions of price competition: Cournot competition, Bertrand competition, and joint profit maximisation through collusion, and let the model and equilibrium be symmetric. Rank the toughness of price competition from the highest to the lowest, which of the following is the correct ranking?
A.
Cournot, Bertrand, collusion.
B.
Collusion, Bertrand, Cournot.
C.
Cournot, collusion, Bertrand.
D.
Bertrand, Cournot, collusion.
Please solve D and E part only.
Thankyou.
Consider three firms, each with cost function C(qi)=4qi, currently competing Cournot. Market demand is P = 20 – Q.
a. a. Find the quantities, price, and profits of each firm in equilibrium.
b. Imagine firms1 and 2 merged to become one, so after the merger there are now two firms left in the market, firm 1&2 and firm 3. Assume there are no cost efficiencies expected and assume that the two firms play Cournot as before. Find the quantities, price, and profits of each firm in equilibrium
c. Was it profitable for firms 1 and 2 to merge in the first place?
d. Continuing with b., imagine that firms did not play Cournot after the merger, but rather that the merged firm 1&2 became a Stackelberg leader after the merger and firm 3 became the Stackelberg follower. If this were the case, find the quantities, price, and profits of each firm in equilibrium.
e. Was it profitable for firms 1 and 2 to merge in the first place? Did price…
Chapter 10 Solutions
Micro Economics For Today
Ch. 10.1 - Prob. 1YTECh. 10.5 - Prob. 1GECh. 10.6 - Prob. 1YTECh. 10 - Prob. 1SQPCh. 10 - Prob. 2SQPCh. 10 - Prob. 3SQPCh. 10 - Prob. 4SQPCh. 10 - Prob. 5SQPCh. 10 - Prob. 6SQPCh. 10 - Prob. 7SQP
Ch. 10 - Prob. 8SQPCh. 10 - Prob. 9SQPCh. 10 - Prob. 10SQPCh. 10 - Prob. 11SQPCh. 10 - Prob. 12SQPCh. 10 - Prob. 13SQPCh. 10 - Prob. 1SQCh. 10 - Prob. 2SQCh. 10 - Prob. 3SQCh. 10 - Prob. 4SQCh. 10 - Prob. 5SQCh. 10 - Prob. 6SQCh. 10 - Prob. 7SQCh. 10 - Prob. 8SQCh. 10 - Prob. 9SQCh. 10 - An oligopoly is a market structure in which a. one...Ch. 10 - Prob. 11SQCh. 10 - A common characteristic of oligopolies is a....Ch. 10 - Prob. 13SQCh. 10 - Prob. 14SQCh. 10 - Prob. 15SQCh. 10 - Prob. 16SQCh. 10 - Prob. 17SQCh. 10 - Prob. 18SQCh. 10 - Prob. 19SQCh. 10 - The kinked oligopoly demand curve is a result of...
Knowledge Booster
Similar questions
- 21. In the industry, only two firms (Firm 1 and Firm 2) operate and they produce a homogenous good. They collude: they maximize their joint profit and split it equally between them. Firm I has the total cost of producing q; units of output given by the function TC(q)-8q1. The total cost of producing q: units of output for Firm 2 is TC(q)-q. Only integer quantities are allowed (no fractions). The market demand for the good is Q(P)-72-P, where Q is the quantity demanded and P is the unit price of the good. How many units of the good do cach firm produce in the equilibrium? A. Each firm produces 14 units. B. Firm I produces 32 units, and Firm 2 produces 2 units. C. Firm 1 produces 28 units, and Firm 2 produces 4 units. D. Each firm produces 16 units. E. None of the abovearrow_forwardExplain in few lines Three firms are competing through prices (Bertrand competition). They are all selling the same products. The only difference is that the first two firms have a constant marginal cost equal to 2 while the third firm has a constant marginal cost equal to 5. In equilibrium the two firms with lower marginal cost will set their price just slightly below 5arrow_forwardHP and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix: If HP and Lenovo both set high prices, HP’s profit is $40 million and Sony’s profit is $35 million. If HP sets high price and Sony sets low price, HP’s profit is $25 million and Sony’s profit is $40 million. If HP sets low price and Sony sets high price, HP’s profit is $50 million and Sony’s profit is $10 million. If HP and Sony set low prices, HP has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? HP? If so, which one? If HP and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if HP and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.arrow_forward
- am. 124.arrow_forwardQUESTION 4 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 = 53 - Q. The marginal cost to produce this new drink is $5. What price would this new drink sell for if the market was a Stackelberg duopoly? A. $17 В. $21 C. $29 D. $16.50arrow_forwardPlease all solve the questionarrow_forward
- pic 1 : A small town is served by many competing supermarkets, which all have the same constant marginal cost. Use the black point (plus symbol) to show the competitive price and quantity in this market. Then use the green area (triangle symbol) to shade the area representing consumer surplus in the market for groceries, and use the purple area (diamond symbol) to shade the area representing producer surplus. pic 2 : Now suppose that the independent supermarkets combine into one chain. Use the black point (plus symbol) to show the profit-maximizing monopoly outcome. Then use the green area (triangle symbol) to shade the area representing consumer surplus in the market for groceries, and use the purple area (diamond symbol) to shade the area representing producer surplus. Finally, use the black area (plus symbol) to shade the area representing deadweight loss. Which of the following statements is true about the changes that occur after the supermarkets merge?…arrow_forwardTwo firms compete under Cournot competition with constant marginal costs c_1 = 9 and c_2 = 3. The market demand is P=24-Q. a) Compute the market share of each firm, the market price, and the total quantity produced in the market. b) Compute the HHI index. c) Compute the Lerner index.arrow_forwardSuppose you’re operating one of only two coffee shops in town. Assume that both coffee shops produce identical coffee so that customers only care about the price. That is, you’re engaged in Bertrand competition. If you know that the other coffee shop charges $5 for a 16oz coffee, what price should you set for your 16oz coffee? Question 22Answer a. $4.99 b. $5.01 c. $5.00 d. $6 e. $4arrow_forward
- The figure below shows the demand (D, MR) and cost (MC, ATC) curves for six oligopolies in the chewing gum industry. Assume that all 6 firms have the same identical cost curves. Demand and cost conditions for the Chewing Gum Industry $4 Dollars .40 .35 .25 MC MR a. 12,000; $.40 b. 14,000; $.30 c. 16,000; $.35 d. 12,000; $.25 ATC D 0 12 14 16 Packs of chewing gum in thousands Suppose the six firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D in the figure above. To maximize profits, the cartel should produce packs of chewing gum and the price should bearrow_forwardhelparrow_forwardExplain why the following statement is false. Consider an imperfect market with a few firms. By forming the best strategy to compete with each’s rivals, the firms in the market will get the best profit they can.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Economics (MindTap Course List)EconomicsISBN:9781305260948Author:Irvin B. TuckerPublisher:Cengage Learning
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning