Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.11P
a)
To determine
Reason for extent of firm’s market.
b)
To determine
To find:
Profit maximizing price.
c)
To determine
To find:
Derivation of
d)
To determine
To find:
Profit at equilibrium is
e)
To determine
To find:
Number of firms to enter in long-run.
f)
To determine
To find:
Socially optimal level of differentiation
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Now consider Atlanta as an oligopoly market with five airlines that behave in a Cournot Model fashion. The Atlanta market demand schedule is:P = 400 - .5*Q.The Cost schedule for Delta is:MC=AC=Scomp=100.The Cost schedule for the other four firms (United, Southwest, et al) is:MC=AC=Scomp=100.What is the Cournot Market Price
Economics
Reference the following information about the market demand function for questions 1 to 15. These questions are on different types of market structures – monopoly, perfect competition, Cournot oligopoly market, and the Stackelberg oligopoly market.
The market demand function is given the following equation: P = 2000 – Q where Q is the industry’s output level.
Suppose initially this market is served by a single firm. Let the total cost function of this firm be given the function C(Q) = 200Q. The firm’s marginal cost of production (MC) is equal to the firm’s average cost (AC):
MC = AC = 200.
Now suppose the two firms engage in Stackelberg market competition. Assume firm 1 is the leader (first-mover) and firm 2 is the follower firm (second-mover).
Marginal profit function of Stackelberg leader: 900−Q1
QUESTION 14:
What will be the market price in this Stackelberg model?
Group of answer choices
$480
$650
$720
$900
QUESTION 15:
Can you calculate the profit earned by the…
The Department of Justice and the Federal Trade Commission use the HI calculation for a market to evaluate proposed horizontal mergers.
For example, if the post-merger HHI is below ——- , then the market is not concentrated, so mergers in them are not challenged; however, at the other extreme, if the post-merger HHI is above ——- then the market is highly concentrated, and mergers that increase the HHI by 100 to 200 points may be challenged and mergers that increase the HHI by more than 200 points will likely be challenged. (Enter your responses as integers.)
Knowledge Booster
Similar questions
- Consider a market that is a Bertrand oligopoly with 5 firms in the market. Each of these firms produce an identical product and each have the same cost function of C(Q) = 80Q. The inverse market demand for this product is P = 2480 – 2Q. What is the equilibrium market price?arrow_forwardUgly Dolls Inc. (UD) is a firm in Mytown that sells its products on a market under monopolistic competition. The cost function of UD is represented by TC = 100+10Q. Lately, because of the UD is making a big amount of profit, some firms enter the market to compete. Assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct.arrow_forwardOligopoly is a market structure in which only a few enterprises can prevent the others from exerting considerable influence. The concentration ratio is a measure of the largest companies' market share. One firm is a monopoly, two firms are a duopoly, and two or more firms are an oligopoly. The number of firms in an oligopoly has no definite upper limit, but it must be small enough that the activities of one firm have a considerable impact on the others. Steel corporations, oil companies, railways, tyre companies, grocery store chains, and cellular providers have all been oligopolies in the past. An oligopoly, according to economic and legal concerns, can stifle new entrants, limit innovation, and raise prices, all of which affect consumers. Instead of collecting prices from the market, firms in an oligopoly determine pricing, whether collectively (in a cartel) or under the leadership of a single enterprise. As a result, profit margins are higher than in a more competitive market.…arrow_forward
- Suppose we have the "classic" Cournot duopoly model, with a linear demand curve P = a - bQ And two firms which are identical, each with total costs TC(q) = c + dq. (a) What is the market price in the Cournot equilibrium and what profit is earned by an individual firm?(b) Compare individual quantity, market quantity, market price, individual profits and consumer surplus ( show it in a graph) to the outcomes of this market were a monopoly. Comment on your results. Show all the steps of the calculationarrow_forwardPlease answer each part step by step with the solution.arrow_forwardThe next question has two parts. Part I. Consider a Cournot game among sellers of homogeneous products. Assume that demand is p=64-8Q, that each seller has a cost function C(q)=4q and that the cost of entering the market is K=5. How many firms would profitably enter the market? [Remark: n should be an integer number so write your answer as an integer number rounding down; e.g. 5,8 firms rounds to 5 firms.]arrow_forward
- Consider a standard Cournot oligopoly with n ≥ 2 identical firms, P(x) = a - bX, X ≥ 0, and C(x) = cx2. a. Find the Cournot equilibrium output and profit. b. If m firms wish to merge, what would be their cost function, assuming that they can use all their m production plants but that they otherwise do not have any eciency gains as a result of the merger? c. Given the cost function from part b, when is an m-firm merger profitable to the merged entity? To the non merging firms? d. Give a precise economic intuition explaining your answer relative to the usual (linear cost) case.arrow_forwardSuppose that two airlines are Cournot duopolists serving the Peoria-Dubuque route, and the demand curve for tickets per day is Q = 230 - 2p (so p = 115 - Q/2). Total costs of running a flight on this route are 450 + 40q, where q is the number of passengers on the flight. Each flight has a capacity of 80 passengers. In Cournot equilibrium, each duopolist will run one flight per day and will make a daily profit of a) $3,250. b) $1,600. c) $225. d) $800. e) $230.arrow_forwardSuppose firms A, B, and C set prices while facing per-period demand of Q = 200 - P, which yields a MR curve MR = 200 – 2Q for a monopolist. When setting prices non-cooperatively, the firms choose their prices simultaneously. All firms have MC = 20. The firms are currently involved in a cartel that sets the monopoly price and divides quantity evenly among the firms. The firms enforce their cartel arrangement with a grim trigger strategy. The Department of Justice (DOJ) has just started an antitrust division that is designed to break up cartels. The DOJ successfully detects and prosecutes a cartel with probability s, and prosecuted cartels receive the fine F and are prevented from ever colluding again. The firms believe that their interaction will continue forever (p = 1.0), and they discount future periods at R 0.80. I. Which strategic variable are the firms choosing? What type of competition is this? O A. Quantity; Cournot O B. Quantity; Bertrand C. Price; Cournot O D. Price; Bertrand…arrow_forward
- Which of the following hypothetical markets would be best modeled as a Stackelberg oligopoly? A town containing several restaurants, each serving a different type of cuisine. A town containing many independent coffee shops with very similar menus. A town containing several banks offering identical services, although one bank has been open in this town far longer than the others. An industry containing several factories capable of producing exactly the same product and that bid for manufacturing contracts. A county containing several farms that grow the same crops, which are all sold at the same time at the end of harvest.arrow_forwardTwo firms who make identical products engage in Cournot competition. The inverse market demand curve is: P(Q) = 60 - 10Q, where Q=9₁ +92. The cost functions are C₁(9₁) 1091 and C₂ (92) : 592 for firms 1 and 2, respectively. Find the Nash equilibrium quantities for each firm. (a) 9₁ = = 1.5, 92 2 (b) q₁ = 92 = 2 (c) q₁ = 92 = 1.5 (d) 9₁ = 1.5, 92 = 3 (e) None of the above options is correct.arrow_forwardSuppose the jeans industry is an oligopoly in which each firm sells its own distinctive brand of jeans. Each firm believes its rivals will not follow its price increases but will follow its price cuts. The demand curve for each company will be This demand curve means that firms in the jeans industry compete against one another.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning