EBK MANAGERIAL ECONOMICS & BUSINESS STR
EBK MANAGERIAL ECONOMICS & BUSINESS STR
9th Edition
ISBN: 8220103676267
Author: Baye
Publisher: YUZU
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Chapter 7, Problem 20PAA

In 2006. the five leading suppliers of digital cameras in the United States were Canon. Sony, Kodak. Olympus. and Samsung. The combined market share of these five firms was 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. The own price elasticity for Canons cameras was -4.0 and the market elasticity of demand was -1.6. Suppose that in 2006, the average retail price of a Canon digital camera was $240 and that Canon’s marginal cost was $180 per camera. Based on this information, discuss industry concentration, demand and market conditions, and the pricing behavior of Canon in 2006. Do you think the industry environment is significantly different today? Explain.

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"Whether the regulator sells or gives away tradeable emission permits free of charge, the quantities of emissions produced by firms are the same." Assume that there are n identical profit-maximising firms where profit for each firm is given by π(e) with л'(e) > 0; π"(e) < 0 and e denotes emissions. Individual emissions summed over all firms gives E which generates environmental damages D(E). Show that the regulator achieves the optimal level of total pollution through a tradeable emission permit scheme, where the permits are distributed according to the following cases: Case (i) the firm purchases all permits; Case (ii) the firm receives all permits free; and Page 3 of 5 ES30031 Case (iii) the firm purchases a portion of its permits and receives the remainder free of charge.
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