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8, Cartels which are not backed by strong legal provisions (sanctions) are likely to have a short and turbulent life. Explain why? Briefly
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- 20. Using two carefully drawn and labeled diagrams, analyze an input cartel. That is, on the left side of the page, draw a diagram for one of the firms, and on the right side, draw a diagram for the labor market. Indicate the equilibrium wage and employment for the market if the labor market is competitive, (WC , LC), and the corresponding outcome for a firm, (WC, lC). Then, explain how the cartel adjusts the wage and employment.Explain the circumstances under which cartels may fail. Refer to microeconomics and show a diagram.Evaluate the following statement: "A cartel will put an end to price wars, which is a barbaric form of competition that benefits no one."
- Coke and Pepsi dominate the cola market. Suppose that the marginal cost of making cola is $2. Assume also that the demand for cola is given by the following table: Price $8 7 6 5 4 3 2 1 Quantity 5 cans 6 7 8 9 10 11 12 Suppose Coke and Pepsi both supply cola. They form a cartel and agree to cooperate on how much soda to produce. In this cartel case, how many bottles of cola would be sold? Type your answer...7, What is a cartel and what are the principal activities the cartels are involved in (that is what tasks do the cartel managers pursue in order to be successful)? Briefly for managerial economics classThe diagram below illustrates the change in market equilibrium in the global oil market due to a demand shock, with the demand curve shifting from Demand to Demand'. Supply of oil is provided by OPEC countries, as part of a cartel agreement, and other countries outside the cartel, P. P. Demand Demand Quantity, Q Q Q. Which of the following statements is/are correct? global a) If more countries joined OPEC, and reduced the quantity of oil that they produced as a cartel, it is possible that market oil price could stay the same depending on other market dynamics. b) The price of oil in the global market is fixed by the members of the OPEC cartel. c) If there is increased production of oil in a non-OPEC country when demand is at Demand' there would be a reduction in price from P1, ceteris paribus.
- Write down a homogeneous good cartel model of quantity choice with two firms. State andexplain the key assumptions of the model. Using the model, answer:(a) Analyse and explain how the cartel would decide the optimal quantity for each firm.Imagine that you are advising a small new car dealership. They ask:A) given the information below, what is the best price they should put on all the cars, assuming every buyer pays the same price and how much profit will they make? B) is there a better way to make profits and how much profit could they make? why might this strategy be difficult to use? The firm can't change their costs. But they could use a different pricing scheme, not charging every customer the same price. Fixed cost for business is $4000 Variable cost is $20,000 for each car they get from the manufacturer. They anticipate the following customers. Ms. Rich would pay up to $30,000 Mr. Upper Middle would pay up to $26,000 Ms. Middle would pay up to $22,000 Mr. Lower Middle would pay up to $18,000 Ms. Poor would pay up to $16,000The task to complete is to create a market scenario for a branded handbag. (You can google handbags and come up with hundreds!): Name the company and describe one of its "signature" handbags. - Draw the monopolistic competition market model for that company showing a profit. 1. Do you think that the United State's economic system is best described by a perfectly competitive dynamic or best described by a monopoly dynamic where there are forces that exclude entry into markets or by a monopolistic competition dynamic with some power to exclude entry but mainly a market of differentiation?
- What is a cartel? In what way is an analysis of cartel similar to an analysis of a monopolySuppose there are only two automobile companies,Ford and Chevrolet. Ford believes that Chevrolet will match any price it sets, but Chevrolet too is interested in maximizing profit. Use the following price and profit data to answer the following questions. a. What price will Ford charge?b. What price will Chevrolet charge once Ford has set its price?c. What is Ford’s profit after Chevrolet’s response?d. If the two firms collaborated to maximize joint profits, whatprices would they set?e. Given your answer to part (d), how could undetected cheatingon price cause the cheating firm’s profit to rise?In the United States cartels are
