Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 18, Problem 6SPPA
To determine
To explain:
The type of war between Company C and Company P and their strategies that they use in a game.
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1. compare the quantity and price of an oligopoly to those of a monopoly
2. compare the quantity and price of an oligopoly to competitive market
Question 20
In the market for a brand name medicine with a single company selling the medicine,
that company is a_______Eventually, the government lets other companies sell the medicine as a "generic" alternative to the brand name. The effect of this increased competition is to_______ the medicine's price.O. monopoly, decreaseO. oligopoly, decreaseO. monopoly, increaseO. oligopoly, increase
2. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…
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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- 1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges a low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earns profits of $30. if one firm charges a high price and the other firm charges a low price, the firm that charges the lowest price earns profits of $50 and the firm charging the highest price earns profits of zero. a. Write this game in normal form. b. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate if 50 percent?arrow_forward1&2 pleasearrow_forwardNonearrow_forward
- 1. The two largest cigarette producers are Phillip Morris and R. J. Reynolds. Both are considering whether to increase their price for a pack of cigarettes or keep the price unchanged. The relevant factors to consider are: 1) demand for cigarettes is inelastic, so if both firms raise prices they will increase their revenue, and 2) if one raises price and the other doesn't, they will lose market share to their rival R. J. Reynolds Increase No change Increase R: 500 million R: 400 million P: 600 million P: 300 million Phillip Morris No change R: 200 million R: 300 million P: 500 million P: 400 million Does either cigarette maker have a dominant strategy? Why or why not? Use the above matrix to answer, and assume the two companies do not cooperate For purposes of the problem, ignore the existence of other cigarette makers. 2. Does the answer to #1 change if the two firms can cooperate? 3. How would your answer to #1 change if the outcome matrix changed to the following: R. J. Reynolds…arrow_forward1arrow_forwardFigure 1.7 represents an oligopoly firm. The existing price and quantity are $10 and 2000 units. The firm's demand curve will be... PRICE (S) Figure 1.7 D2 DI a. D₁ED₁ b. D2ED2 c. D₁ED2 d. D₂ED1 2000 QUANTITY D2arrow_forward
- 4arrow_forwardEconomics Remove flag Anna, Bill, and Charles are competitors in a local market, and each is trying to decide whether it is worthwhile to advertise, If all of them advertise, each will earn a profit of $5000. If none of them advertise, each will earn a profit of $8000, If only one of them advertises, the one who advertises will earn a profit of $10,000 and the other two will each earn $2000. If two of them advertise, those two will each earn a profit of $6000 and the other one will earn $1000. If all three follow their dominant strategy, what will Anna do, and how much will she earn? Select one: a. Anna will advertise and earn $5000. b. Anna will advertise and earn $6000. C. Anna will not advertise and will earn $8000, d. Anna will advertise and earn $10,000.arrow_forwardBreakdown of a cartel agreement Consider a town in which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 5.40 0 0 4.95 40 $198.00 4.50 80 $360.00 4.05 120 $486.00 3.60 160 $576.00 3.15 200 $630.00 2.70 240 $648.00 2.25 280 $630.00 1.80 320 $576.00 1.35 360 $486.00 0.90 400 $360.00 0.45 440 $198.00 0 480 0 Suppose Sean and Yvette form a cartel and behave as a monopolist. The profit-maximizing price is $ __________ per gallon, and the total output is __________ gallons. As part of their cartel agreement, Sean and Yvette agree to split production equally. Therefore, Sean's profit is $ __________ , and Yvette's profit is __________ .…arrow_forward
- Price competition in an oligopoly leads to a high probability of : a. higher prices b. price collusion c. a government regulated price d. a price war Help!arrow_forwardQuestion 6 Assume Eric and Kenny control all the Oil in the world. They have agreed to divide the world market with Eric selling 1,200 Barrels and Kenny selling 1,400 Barrels. They have found through experience that the Demand Curve for Oil has the following values, and the following total revenues: Eric Quantity 2,600 Barrels 3,200 Barrels 3,400 Barrels 4,000 Barrels 1,200 Barrels 2,000 Barrels Price $77.75 $56.00 $47.75 $20.00 1,400 Barrels Total Revenue $202,150 $179,200 $162,350 $ 80,000 $93,300 $108,850 $95,500 $66,850 The Missing Value for Kenny is: [Select] Kenny Is there a short-term incentive for Kenny to Cheat? [Select] Is there a short-term incentive for Eric to Cheat? [Select] 2,000 Barrels $67,200 $40,000 $112,000 ?Missing Value? Over the Long-Run are they Likely to Overcome any Hurt Feelings and return to the Agreement? [Select]arrow_forwardIn which of the following situations would Maria's Doughnut Shop have the MOST market power? Select one: a. The closest doughnut shop or bakery is 25 miles away from Maria's shop. b. There are two rival doughnut shops within three miles but no other bakeries. c. The closest doughnut shop is 10 miles away, but there is a bakery with breakfast pastries two miles away. d. Within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries.arrow_forward
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