Homework 9
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Economics
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May 3, 2024
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1.
(0, 5, or 10)
Why did the import competition in the automobile industry lead to
quality improvements and cost reductions by American automobile firms?
Answer: Foreign competitors put market pressure on American automobile firms to
improve the quality and cost of the products.
Reason: More competitors signify that the market is a monopolistic competition,
meaning that many firms with each firm producing a similar but slightly different
product. In the market, because they have similar products, the firms have to have to
compete with each other using pricing control, product differentiation, packaging, and
advertising strategies.
.
(0, 5, or 10)
Suppose that the U.S. Congress passes trade restrictions on imports of
French wine into the U.S. What will be the possible effects (gain or loss) of these
restrictions on:
a. U.S. consumers of wine?
Answer: Loss
Reason: the consumers will face higher prices because the trade restriction will
reduce their purchasing power.
b. U.S. producers of wine?
Answer: Gain
Reason: The restriction could lead to increased sales and market share for U.S. wine
producers.
c. French producers of wine?
Answer: Loss
Reason: Reduction in access to the U.S. market will
d. U.S. exports?
Answer: Loss
Reason: If France retaliates with trade restrictions on U.S. exports, U.S. exports to
France may decline, resulting in a potential loss for U.S. exporters.
e. the U.S. as a whole?
Answer: The overall impact on the U.S. as a whole is mixed.
Reason: While U.S. wine producers may benefit, U.S. consumers will face higher wine
prices. Additionally, any potential trade war with France could have broader negative
economic implications, affecting various industries and potentially harming the U.S.
economy.
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Related Questions
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market for whatchamacallits consists of two producers, Emma and Joshua. Each firm can produce
whatchamacallits with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel,
agreed to split production of output evenly, and are maximizing total industry profits. If Emma decides to
cheat on the agreement and sell 100 more whatchamacallits, Emma's profit will be and Joshua's profit
will be
Table: Demand Schedule for Whatchamacallits
Price of a
Quantity of
Whatchamacallit
Whatchamacallits
$10
9
8
7
6
5
4
3
2
1
0
a) $1,250; $1.250
b) $1,000; $1,400
c) $500; $500
d) $1,400; $1,000
Demanded
0
100
200
300
400
500
600
700
800
900
1,000
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(Monopolistic Competition Market)
3D. What is the overall impact of the monopolistic competition market structure on the competition?
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6. (Price Leadership) Why might a price-leadership model of oligopoly not be an effective means of collusion in an oligopoly?
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monopolist produce at the unit elastic point on the demand curve?
Rich Text Area. Press ALT-0 for help.
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10. (Perfect Price Discrimination) Why is the perfectly dis- criminating monopolist’s marginal revenue curve identical to the demand curve it faces?
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cost of production of laptops for each firm in each country are 10000 and 1000 respectively;
and the degree of responsiveness of each firm's sales to its price, vis-à-vis other firms is
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What is the equilibrium price in these countries under autarky? (iii) Calculate the total
number of firms after the economies are opened up to trade and the equilibrium price. (iv)
How will your answer to the above parts change if the marginal cost of production of laptop
for every firm increases to 2000?
(b) A country produces two goods: Cars (using labour and machines) and…
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a. At what output rate and price does the monopolist operate?
b. In equilibrium, approximately what is the firm's total cost and total revenue?
c. What is the firm's economic profit or loss in equilibrium?
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already has broadband, so any potential new company would be unable to compete with the
existing providers. *
(1 Point)
Unique
Differentiated
Standardized (Identical)
providers of broadband Internet access: a cable
. AT&T), and two satellite companies. The
32.
Unique
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a. State all the dominated strategies in the full…
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QUESTION 5
In recent years, technology has greatly improved our listening experience through better earphones and headphones. Some of the popular
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Answer the following questions:
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and are able to rival many existing popular brands. There are many positive reviews for Company X and it is believed that their
arrival will provide consumers more options when choosing a headphone. The arrival of Company X's headphones will probably
result in the demand for existing headphones to be more
Type I for Inelastic, E for Elastic or N for No
changes.
b. Company X is experimenting to decide the best price to sell their newest headphones. In a surveyed market, it is estimated that 685
headphones can be sold in a day if it is sold at a price of $366. If prices drop to $312, more headphones can be sold and…
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14. (Figure: Payoff Matrix for Alex and Sybil) Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are
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the following week. The figure shows the profit per week earned by the two businesses. Suppose the firms
each decide to price high initially and adopt a Grim Trigger strategy for the following weeks. After a few
weeks, Alex's weekly profit would be
Payoff Matrix for Alex and Sybil
and Sybil's weekly profit would be
Alex charges a high price
Alex earns $1,000 per week
Sybil earns $1000 per week
Alex earns $200 per week
Sybil earns $1,500 per week
Sybil charges a high price
Sybil charges a low price
a. $800; $800
b. $1,000; $1,000
c. $1,500; $200
d. $200; $1,500
Alex charges a low price
Alex earns $1,500 per week
Sybil earns $200 per week
Alex earns $800 per week
Sybil earns $800 per week
If the movie theater
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28. Type of product: Dozens of companies produce plain white socks. Consumers regard plain white
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business could obtain a loan from a bank to buy the necessary machinery. *
(1 Point)
Differentiated
Differentiated
Standardized (ldentical)
plain white socks. Consumers regard plain white
Ils them their socks. The technology for producing
29.
Unique
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Firms compete in different types of market structures. In the real world, most markets are either monopolistically competitive or oligopolistic, and a few markets have a monopoly. Note that perfect competition is rare because no market has all the characteristics of a perfectly competitive market as described by the theory of perfect competition.
1. (a) What is a monopoly? Give an example.
(b) How many firms are there in the Internet provider market?
Is it easy or difficult for new firms to set up and compete in this industry? Explain.
(c) How do firms in the Internet provider market compete?
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regulation.
Explain why
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rate-of-return regulation on a natural monopoly. Given
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Widget is a commodity that is traded in a perfectly competitive global market that consists of many small price-taking firms. The firms fall in
three categories with the following characteristics:
Number of
firms
Capacity of firm's plant (units AVC (S per Fixed cost per unit at full
per year)
Capital charge per unit at full
capacity ($/unit)
unit)
capacity ($/unit)
Type 25
100 units
30
15
10
1
Туре 50
50 units
40
20
10
Type 100
40 units
45
25
10
3
Assume that each firm's AVC is constant up to the capacity of its plant. Further, assume that once built, a firm's plant has zero
redeployment value. Finally, assume that a typical entrant has a cost structure identical to the Type 1 firms and that there are many
potential entrants.
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(Remember: use only whole numbers, and do not use any other characters or spaces.)
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ii) "A cake is divided between two individuals; Pareto optimality requires that they
receive equal shares".
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at $5. His demand information is as follows:
Price ($)
QD
50
40
30
10
20
20
15
30
10
50
5
102
2.50
200
a. Calculate the total revenue for Bob at each price.
b. Calculate the (approximate) marginal revenue for Bob at each price.
c. What is Bob's profit-maximising output level and price? Compare this with the perfectly competitive
equilibrium level of output and price.
d. (REAL-WORLD APPLICATION) Go to this useful graphics: www.scores.org/graphics/monopoly, and
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