Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 4IAPA
To determine
To find:
Whether Company W will believe Company A's assertion or not and whether the Company W will enter the market or not.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose button industry is characterized by monopolistic competition with external economy. China is currently the dominant producer of buttons. Explain why Vietnam may find it difficult to compete with China in a button industry even if Vietnam has lower average cost as a function of the size of the industry
Suppose that in the market for cell phone service the number of competitors has dwindled until D & C Romer Net and Spa T.
Wireless have become the only providers left in the nation. Seeking to boost their profits, the two companies secretly agree to a
coordinated increase in their prices for cell phone minutes.
This practice is known as
a Nash equilibrium.
tying.
collusion.
antitrust.
predatory pricing.
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…
Chapter 18 Solutions
Foundations of Economics (8th Edition)
Ch. 18 - Prob. 1SPPACh. 18 - Prob. 2SPPACh. 18 - Prob. 3SPPACh. 18 - Prob. 4SPPACh. 18 - Prob. 5SPPACh. 18 - Prob. 6SPPACh. 18 - Prob. 7SPPACh. 18 - Prob. 8SPPACh. 18 - Prob. 1IAPACh. 18 - Prob. 2IAPA
Ch. 18 - Prob. 3IAPACh. 18 - Prob. 4IAPACh. 18 - Use this information to work Problems 5 to 7. DOJ...Ch. 18 - Use this information to work Problems 5 to 7. DOJ...Ch. 18 - Prob. 7IAPACh. 18 - Which of the following statements is incorrect. In...Ch. 18 - If firms in oligopoly form a cartel, it will...Ch. 18 - Prob. 3MCQCh. 18 - Prob. 4MCQCh. 18 - Prob. 5MCQCh. 18 - Prob. 6MCQCh. 18 - Prob. 7MCQ
Knowledge Booster
Similar questions
- Q8arrow_forwardThe New York Times reports that Wal-Mart has decided to challenge Netflix and enter the online DVD-by-mail market. Because of economies of scale, Wal-Mart has a slight cost advantage relative to Netflix. Wal-Mart is considering the use of a limit pricing strategy. It can enter the market by matching Netflix on price. If it does, and Netflix maintains its price, then both firms would earn $5 million. But if Netflix drops its price in response, Wal-Mart would have to follow and would earn $2 million; Netflix would earn $3 million. Or Wal-Mart could enter the market with a price that is below Netflix's current price but above its marginal cost. If it does, Netflix would make one of two moves. It could reduce its price to below that of Wal-Mart. If it does, Wal-Mart will earn a profit of $0, and Netflix will earn a profit of $2 mil- lion. Or Netflix could keep its present price. If Netflix keeps its present price, Wal-Mart can keep its present price and earn $6 million (while Netflix earns…arrow_forwardPlease solve it quickly you can upload handwritten answer also. Consider Atlanta as an oligopoly market with five airlines that behave in a Cournot Model fashion. The Atlanta market demand schedule is: P = 390 - .5*Q. The Cost schedule for Delta is: MC=AC=Scomp=80. The Cost schedule for the other four firms (United, Southwest, et al) is: MC=AC=Scomp=40. What is Delta’s new market share?arrow_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 .40 .35 .31 8.30 .25 Dollars MC MR ATC D 0 12 14 16 Packs of chewing gum in thousands Suppose you're hired by the Department of Justice Anti-Trust Division to analyze the chewing gum industry. You conclude that if the industry were perfectly competitive, the short-run equilibrium output and price would be: a. 14,000 packs of chewing gum at a price of $0.30 per pack b. 16,000 packs of chewing gum at a price of $0.35 per pack C. indeterminate output levels from this information. d. 12,000 packs of chewing gum at a price of $0.40 per packarrow_forwardAssume that the competition between Boeing and Airbus can be characterized by the following matrix Airbus Produce Quit Boeing Produce 5/15 0/110 90/0 0/0 Quit where the first number in each cell denotes the payoff that Boeing receives and the second number is the payoff that Airbus receives. Then you would expect both Boeing and Airbus to produce Boeing to leave the market and Airbus to keep producing Airbus to leave the market and Boeing to keep producing that there will be no stable equilibriumarrow_forwardThis is a Microeconomics problem. What is a reaction curve in an oligopolistic market?arrow_forward
- In January 2007, XM enjoyed about 58 percent of satellite radio subscribers, and Sirius had the remaining 42 percent. Both firms were suffering losses, despite their dominance in the satellite radio market. In 2008, the DOJ decided not to challenge a merger, and these two firms united to become Sirius XM. If you were an economic consultant for Sirius, what economic arguments would you have presented to the DOJ to persuade it not to challenge the merger? Explainarrow_forwardDiscuss why a producer in an oligopolist market ("few" competitors) will pay closer attention to their competitors than a producer in a highly competitive market ("many" competitors).arrow_forwardBriefly contrast the difference between equilibrium market outcomes in a monopoly, oligopoly, and perfect competition.arrow_forward
- The first mate of the Spanish fleet approaches Crusoe with a list in hand. He knows that Crusoe is a mystery economist and a financial wizard, so he does not even try to bargain. On the other hand, Crusoe, out of respect for the competitive market he "worships," he does not take advantage of the monopolistic situation. Taking goat for example, Crusoe is willing to sell goat at the following schedule (assuming linear functional form): Quantity 0 1 2 7 100 1 From his perfect knowledge of the Spanish fleet, he derives the following demand schedule (assuming linear functional form): Price 19 21 23 1 2 219 Quantity Price 0 442 100 438 434 If both parties (Crusoe and the Spanish) are strictly following their own schedule, then: Question 2.1: What is the market equilibrium price and quantity? A: P = 158 Q = 69.5 B: P = 159 Q = 70 C: P = 160 Q = 70.5 D: P = 161 Q = 71 42 However, the captain does not want to spend too much money on goats, so he restricts the first mate to buy at the maximum of…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_forwardThere are two firms competing in the market for Airplanes - Boeing (B) and Airbus (A). The market demand is given by Q = 120 - p. Their marginal cost are as follows: MCB = $20, MCA = $40. (Think of price being in millions.) How many airplanes did Boeing sell in this Airplane (please put your answer in numerical values with no comma or decimal place). How many airplanes did Airbus sell in this Airplane market? (please put your answer in numerical values with no comma or decimal place). What is the total quantities of airplanes sold in the market? (please put your market? answer in numerical values with no comma or decimal place) What is the equilibrium price in millions? million (please put your answer in numerical values with no dollar sign, comma or decimal place). What is Boeing's profit in millions? million (please put your answer in numerical values with no dollar sign, comma or decimal place). What million (please put your answer in numerical values with no dollar (please put is…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning