Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 18, Problem 5IAPA
Use this information to work Problems 5 to 7.
DOJ investigation prompts lawsuits alleging that airlines are fixing airfares
It is alleged that Southwest Airlines, American Airlines, Delta Air Lines, and United Airlines have been colluding to limit the increases in their capacity with the intent of increasing airfares. The airlines say the allegations are without merit and that the airline industry is highly competitive with more people flying than ever before.
Explain how limiting the increase in capacity could lead to higher airfares.
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Question 74
Table 18-4
Only two firms, ABC and XYZ, sell a particular product. The following table shows the demand curve for their
product. Each firm has the same constant marginal cost of $8 and zero fixed cost.
Price
(Dollars per unit)
28
26
20
18
16
14
12
10
6
$90
2
0
$140
$240
Quantity Demanded Total Revenue
$280
(Units)
Refer to Table 18-4. ABC and XYZ agree to maximize joint profits. However, while ABC produces the agreed-upon
amount, XYZ breaks the agreement and produces 5 more than agreed. How much profit does XYZ make?
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
(Dollars)
0
130
240
330
400
450
480
490
480
450
400
330
240
130
0
In 2015, Apple introduced the Apple Watch. Assume that the cost of producing the 38mm Apple Watch Sport was
$83.
The price was
$336.
What was Apple's price/marginal cost ratio? What was its Lerner Index? If Apple is a short-run profit-maximizing monopoly, what elasticity of demand did Apple believe it faced?
Part 2
Apple's price/marginal cost ratio was
enter your response here.
The table shows the total revenue of the 50 firms in the tattoo industry.
Total revenue
(dollars)
1,450
Calculate the four-firm concentration ratio and the HHI.
Firm
Bright Spots
Freckles
>>> Answer to 2 decimal places.
1,300
What is the market structure of the tattoo industry?
Love Galore
800
Native Birds
650
The four-firm concentration ratio equals
Next 10 firms (each)
200
Next 16 firms (each)
Next 20 firms (each)
150
The HHI equals
125
The four-firm concentration ratio indicates that the market is
and the Herfindahl-Hirschman Index
Industry
11,100
indicates that the market is
(Assume there are no reasons that would make the concentration measures
unreliable guides.)
O A. monopolistic competition; a monopoly
O B. probably not monopolistic competition; monopolistic competition
OC. monopolistic competition; monopolistic competition
O D. a monopoly; monopolistic competition
O E. a monopoly; a monopoly
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
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