Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 18, Problem 6IAPA
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 greater profit for the airlines, smaller consumer surplus, and
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Case study 8.4: Private school fees
Private schools in row over fee-fixing'6
Eton, Westminster and Marlborough are among
Some of Britain's top private schools stand accused of the schools that appear to have colluded on the fees
price-fixing after meeting to plan steep increases in
fees, which lawyers say could breach competition laws. considering launching an investigation as parents
they charge. The Office of Fair Trading is now
On February 7 the Eton Group, including
Westminster, Marlborough, King's College school
(London), Sherborne, Tonbridge and Bryanston, met
at Dulwich College, south London. Each of the
bursars outlined the fees they proposed to charge for
the next year.
Andrew Wynn, of Eton, admitted: We do meet and
talk about fees to get some idea of what other
schools are thinking. We are a co-operative bunch,
and we are not out to slit each other's throats.
Although their academic results vary, the group's
six provincial boarding schools are already closely
aligned on fees…
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.
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
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
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- solve correctly. I will rate accordingly.arrow_forwardTable 17-4 Only two firms, ABC and MNO, sell a particular product. The following table shows the demand curve for their product. Each firm has the same constant marginal cost of $4 and zero fixed cost. Price (Dollars per unit) 14 13 12 11 11 10 9 8 7 7 6 5 5 A 4 3 2 2 1 0 Quantity Demanded Total Revenue (Dollars) 0 65 120 QUESTION 9 (Units) 0 5 10 15 20 20 25 30 35 40 45 50 55 60 65 70 165 200 200 225 240 245 240 225 200 165 120 65 0 Refer to Table 17-4. If ABC and MNO operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn? O a. $125.00 O b. $62.50 O c. $225.00 O d. $24.00arrow_forwardSol-Motors is the only auto manufacturer in West Lidia, a country that prohibits the importation of cars. The graph below shows the demand and the costs for Sol-Motors. Costs and revenues (in thousands) 130 120 110 100 90 80 70 60 50 40 30 20 10 0 Price: $ 15. 45 75 9010512013550165180195 30 60 Quantity per period (in thousands) MC D thousands a. Add the marginal revenue curve to the graph above (starting at zero). Plot only the end points. b. What are Sol-Motors' profit-maximizing output and price? Output: thousands Tools MR K c. Suppose that the government of Lidia imposes a price ceiling of $35,000 per car. What is the firm's profit-maximizing output now? Profit-maximizing output: thousands d. What would be the output if the graph represented a perfectly competitive industry rather than a monopoly? Output: thousandsarrow_forward
- Economics Explain why a monopoly producer of shoes will not vertically integrate with perfect competitive distributors, and why a monopoly producer will vertically integrate with a monopoly distributor. Draw the appropriate graphs to explain these cases.arrow_forwardThe 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 monopolyarrow_forwardYou own Athleticon, which manufactures athletic wear. Your new contract with Atlanta United, a professional soccer team, allows Athleticon to be the sole suppler of athletic wear with the “Atlanta United” logo. No one lese can manufacture athletic wear with the “Atlanta United” logo. What do you think will be Athleticon’s level of profitability on the sale of “Atlanta United” athletic wear? Explain why. Your contract with Atlanta United only lasts 3 years. It was not renewed. Other firms can now manufacture athletic wear with the “Atlanta United” logo It is now 5 years after your contract with Atlanta United was terminated. Any manufacturer that wants to can manufacture and sell athletic wear with the “Atlanta United” logo. What do you think will be the level of profitability and rate of return on manufacturing athletic wear with the “Atlanta United” logo? Explain why.arrow_forward
- Sol-Motors is the only auto manufacturer in West Lidia, a country that prohibits the importation of cars. The graph below shows the demand and the costs for Sol-Motors. Costs and revenues (in thousands) 33 30 27 24 21 18 15 12 63 15 Price: $ 45 30 60 Quantity per period (in thousands) MC D 75 105, 135, 165 90 120 150 MR coordinates: pt 1 2 x 0 SAVE y 0 a. Add the marginal revenue curve to the graph above (starting at zero). Plot only the end points. b. What are Sol-Motors' profit-maximizing output and price? Output: thousands thousands c. Suppose that the government of Lidia imposes a price ceiling of $9,000 per car. What is the firm's profit-maximizing output now? Profit-maximizing output: [ thousands d. What would be the output if the graph represented a perfectly competitive industry rather than a monopoly? Output: thousandsarrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardExercise A.12. Explain the differences between the supply and demand curves of a firm in perfect competition and a monopoly.arrow_forward
- Hotel Nemo is the only under-sea hotel in the nation. The table sets out the demand schedule for hotel rooms and the cost schedule for running the hotel. Calculate Hotel Nemo's profit-maximizing price, output and economic profit if it charges a single price for all rooms. Hotel Nemo's profit-maximizing output is Hotel Nemo's profit-maximizing price is >>> Answer to 2 decimal places. rooms a night. a room. When Hotel Nemo produces the profit-maximizing output and charges the profit-maximizing price, economic profit is s >>> If the firm incurs an economic loss, indicate the loss with a minus sign. If the firm eams an economic profit, do not include a plus sign. Price (dollars per room) 272722NO 30 24 21 18 » 15 12 9 6 Quantity (rooms per night) 0 100 200 300 400 500 600 700 800 Total cost (dollars per night) 1,000 1,900 2,800 3,700 4,600 5,500 6,400 7,300 8,200arrow_forwardPrice (dollars per jacket) 888888 180 160 140 120 100 60 40 20 0 80 160 MC profit; $13,000 profit; $7,200 Oloss; $8,000 In the figure above, Gap's economic loss: $13,000 ATC The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). MR 240 320 400 Quantity (jackets per day)arrow_forwardUse the cost and revenue data to answer the questions. Quantity Price Total Revenue Total Cost 10 90 15 80 20 70 25 60 30 50 35 40 900 1200 1400 1500 1500 1400 675 825 1025 1250 1500 1850 What is marginal revenue when quantity is 25? What is marginal cost when quantity is 15? If this firm is a monopoly, at what quantity will profit be maximized? If this is a perfectly competitive market, which quantity will be produced? $ 20 $ 90 Incorrect quantity: 6 Incorrect quantity: 8 Incorrectarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Decision Tree Analysis - Intro and Example with Expected Monetary Value; Author: Vincent Stevenson;https://www.youtube.com/watch?v=cbCsCQ4l4Zs;License: Standard Youtube License