5) Use a supply and demand diagram like in the slide titled "From monopoly to Cournot duopoly" to explain conceptually the supply decision that leads to a Cournot Nash equilibrium, and why it has lower price and total profits than the collusive (monopoly) supply. Optionally you can also use precise numbers: assume market demand behaves like P=36-3Q, (Q=Q1 +Q2), and the constant marginal cost is MC=18, then solve for price and profits, both under collusion and Cournot competition. Hint: you will need to solve for each oligopolist's supply decision contingent on that of the other, so-called best-response functions. You may consult the Perloff excerpt for the individual steps.

5) Use a supply and demand diagram like in the slide titled "From monopoly to Cournot duopoly" to explain conceptually the supply decision that leads to a Cournot Nash equilibrium, and why it has lower price and total profits than the collusive (monopoly) supply. Optionally you can also use precise numbers: assume market demand behaves like P=36-3Q, (Q=Q1 +Q2), and the constant marginal cost is MC=18, then solve for price and profits, both under collusion and Cournot competition. Hint: you will need to solve for each oligopolist's supply decision contingent on that of the other, so-called best-response functions. You may consult the Perloff excerpt for the individual steps.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.6P

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Similar questions

In the linear example illustrated in the figure to the right, how does charging the monopoly a specific tax of t = $8 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes tax revenue)? What is the incidence of the tax on consumers? Determine how imposing the tax affects the monopoly optimum. Use the line drawing tool to show how the tax affects the monopoly's cost of production by drawing a new marginal cost curve with the tax. Label this line 'MC¹'. Carefully follow the instructions above, and only draw the required objects. p, $ per unit 26- 24- 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0- 0 2 3 4 MC D MR 5 6 7 8 9 10 11 12 13 Q, Units per day
In the linear example illustrated in the figure to the right, how does charging the monopoly a specific tax of t= $4 per unit affect the monopoly optimum and the welfare of consumers, the monopoly, and society (where society's welfare includes tax revenue)? What is the incidence of the tax on consumers? Determine how imposing the tax affects the monopoly optimum. Use the line drawing tool to show how the tax affects the monopoly's cost of production by drawing a new marginal cost curve with the tax. Label this line "MC". Carefully follow the instructions above, and only draw the required objects. p. $ per unit 26- 24- 22- 20- 184 d 16- 14- 124 à 104 84 6 4- 23 MC D MR 5 6 7 8 9 10 11 12 13 14 Q. Units per day dou
What are the four most important ways a firm becomes a monopoly? Will a monopoly that maximizes profit also be maximizing revenue? Will it be maximizing output? Explain. Assume the graph below represents the market for a monopolist. What quantity will the monopolist produce, and what price will she charge? What will her total revenue, costs, and profit be at this level of production? What will the deadweight loss for society be at this level of production? (Assume the MC curve is a straight line between the relevant points for this calculation.) 3. U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?
The following table shows the maximum amount five potential car buyers are willing to pay for each level of sales. Suppose that the cars are being sold by a car dealer operating as a monopoly (perhaps because there are no other car dealers in the market). Maximum Amount He or She Would Pay for the Car Buyer 1 $40,000 Buyer 2 $35,000 Buyer 3 $30,000 Buyer 4 $25,000 Buyer 5 $20,000 a) If the price of the car is $30,000, the revenue will be $............thousand.b) If the marginal cost of each car is $20,000. The monopolistic car dealer will want to sell 3 cars and the price will be $................. thousand.c) In a perfectly competitive market, the number of cars sold would be 5 cars. Note:- 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.
George has a monopoly on burrito sales in a small town in Kansas. The burritos cost him a constant $5 each to produce. He faces following demand schedule for his product: Price Quantity Demanded $30 0 $25 1 $20 2 $15 3 $10 4 $5 5 $0 6 Under normal monopoly conditions, how many burritos should he produce, what price should he charge, and how much profit can he expect to make? Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus, and deadweight loss. If George could engage in perfect price discrimination, how many burritos would he produce, what would his total revenue be, and how much profit would he earn? Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus, and deadweight loss. Is society better off by allowing George to perfectly price discriminate? Defend your answer.
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 1.50 Loss ATC 1.00 0.50 MC D MR 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) PRICE (Dollars per unit)
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 АТC 1.50 Loss 1.00 0.50 MC MR 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) PRICE (Dollars per unit)
1) A monopoly faces a demand curve P(Q) = 120 – 2Q, and has a marginal cost of 60. a. What is profit-maximizing level of output? What is the profit-maximizing price? How much profit the firm will make? b. Assume that a second firm enters the market. The new firm has an identical cost function. If the two firms enter in a Cournot competition, what will be the price in equilibrium? How much will each firm produce in equilibrium? How much profit will each firm make? c. If, instead, the two firms compete in a Stackelberg game (assume the incumbent firm is the leader), what will be the price in equilibrium? How much each firm will produce in equilibrium? How much profit will each firm make? d. Now assume the follower has to pay a fixed cost, f =100 if q>0. Does it change the follower's decision? Assume again they are playing a Stackelberg game.? e. The leader knows that the follower has to pay the fixed cost and decides produce one third more than the quantity found in part c). Does it…
“No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist.” Do you agree? Explain. (Think about the phone Monopoly of AT&T or the hydro electricity production plants).
Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit АТС 2.00 Loss 1.50 1.00 MC 0.50 D MR 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) PRICE (Dollars per can)
The figure to the right shows the average total cost curve for a firm producing electricity and the total demand for electricity in the firm's market. If the firm is a monopoly and produces 36 billion kilowatt hours of electricity per year, then its average total cost of production will be $ 0.16 per kilowatt hour. (Enter a numeric response using a real number rounded to two decimal places.) Now suppose instead that two firms are in the market, each producing half of the market's electricity. If each firm has the same average total cost curve, then the average cost of producing electricity will now be $0.08 per kilowatt hour. Price and cost (dollars per kilowatt hour) 0.52- 0.48- 0.44- 0.4- 0.36 0.32- 0.28- 0.24- 0.2- 0.16 0.12- 0.08- 0.04- 0- 0 4 30 8 12 16 20 24 28 32 36 40 4 Quantity of kilowatt hours (in billions)
1. If a firm producing three products faces the profit function Find the amounts of the three products q1, q2 and q3 that will maximize profit and use the Hessian to check that second-order conditions are met. 2. A monopoly operates three plants with total cost schedules and faces the market demand schedule Set up the profit function and then use it to determine how much the firm should make in each plant to maximize profit, using the Hessian to check that second-order conditions are met.