Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 26, Problem 1E
To determine
To state:
The market structure suitable for movie production companies along with the reasons why they would have subsidiary studios.Also, whether the movies that have come out under the Disney name and Touchstone name are different.
Expert Solution & Answer
Answer to Problem 1E
The market structure that best describes the movie production companies is oligopoly.
Studios having subsidiaries helps them maximize profits and have above normal profits in the long run.
The movies that have come out under the Disney name and Touchstone name are not different.
Explanation of Solution
The market structure that best describes the movie production companies is oligopoly. It is because there are only a few players in the market that account for most or all of the production. Oligopoly is characterized as follow.
Oligopoly:
- few sellers exist
- products may be differentiated or homogeneous
- most of the industry output is by a few firms
- there exists advertisement and selling costs
- strategic interdependence of firms
- there exist natural or technical barriers to entry
- kinked
demand curve due to interdependence among firms - A
price decrease is followed by the competitor, but a price increase is not followed. - Supernormal profits
The studios D, MGM and U have subsidiaries so that their market share hold over the market as large as possible. It helps them maximize profits and have above normal profits in the long run.
The movies that have come out under the D name and T name are not different. The movies produced under both banners are similar and have similar quality contents.
Economics Concept Introduction
Oligopoly:
Oligopoly is a market structure where only a few sellers exist, and products may be differentiated or homogeneous.
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Question 6 of 18
>
The graph shows the average total cost (ATC) curve, the
marginal cost (MC) curve, the average variable cost (AVC)
curve, and the marginal revenue (MR) curve (which is also
the market price) for a perfectly competitive firm that
produces terrible towels. Answer the three questions,
assuming that the firm is profit-maximizing and does not shut
down in the short run.
What is the firm's total revenue?
S
What is the firm's total cost?
$
What is the firm's profit? (Enter a negative number for a loss.)
$
Price
$320
$300
$200
$150
205 260
336
365
Quantity
MC
ATC
AVC
MR=P
1. Suppose that the two nations face the following benefits of pollution, B, and costs of
abatement, C: BN = 10, Bs = 7; CN = 5, Cs = 4. Further assume that if the nation chooses to
abate pollution, it still receives the benefits of pollution but now must pay the cost of
abatement as well.
a. Identify the payoffs that accrue to each nation under the four different possible
outcomes of the game and present these payoffs in the normal form of the game.
b. Recall that the term dominant strategy defines the condition that a player in a game
would prefer to play that strategy (in this case either pollute or abate) regardless of
the strategy chosen by the other player in the game. Does either nation have a
dominant strategy in this game? If so, what is it?
c. Identify the Nash equilibria, or non-cooperative equilibria, of this game.
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