PROBLEM (2) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3Q². Calculating the market price under each of the 5 scenarios below, rank/order the Consumer Surplus in each scenario (don't calculate each CS; just rank them); (i) (See textbook's Learning by Doing Exercise 13.2 on page 544 in 5th ed for Cournot competition with more than 2 firms) They compete in quantities with each other (Cournot-Nash equilibrium). (HINT: As you should find out, firms have the same MC's, hence the Best Response equations are symmetrical; hence there is a symmetric solution with qa = q³ =qc as the Cournot-Nash equilibrium) (ii) They collude as though they are all plants of the same single multi-plant monopoly. (iii) B and C act as two plants of a single multi-plant monopoly "B+C", which competes in quantities (Cournot competition) against A. (iv) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. (v) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the "market supply" for the competitive market.

PROBLEM (2) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3Q². Calculating the market price under each of the 5 scenarios below, rank/order the Consumer Surplus in each scenario (don't calculate each CS; just rank them); (i) (See textbook's Learning by Doing Exercise 13.2 on page 544 in 5th ed for Cournot competition with more than 2 firms) They compete in quantities with each other (Cournot-Nash equilibrium). (HINT: As you should find out, firms have the same MC's, hence the Best Response equations are symmetrical; hence there is a symmetric solution with qa = q³ =qc as the Cournot-Nash equilibrium) (ii) They collude as though they are all plants of the same single multi-plant monopoly. (iii) B and C act as two plants of a single multi-plant monopoly "B+C", which competes in quantities (Cournot competition) against A. (iv) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. (v) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the "market supply" for the competitive market.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Monopoly

Section: Chapter Questions

Problem 18SQ

See similar textbooks

Similar questions

Suppose that the Bob Buttons Company (BBC) enters the market. BBC has the same cost function of c=3q+1. Let denote q1 the quantity sold by ABC and denote the q2 quantity sold by BBC. Now suppose that ABC and BBC reach a Cournot equilibrium. Q: What would be the net change in ABC’s profit as a result of BBC’s entry into the market?____ (type in a negative number if ABC’s profit decreases) (please see the attachement for partial of my work, not sure if it's correct, thank you!)
PROBLEM (5) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3(Q)^2. Calculate the market price under each of the 2 scenarios below, (i) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. ( ii) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the “market supply” for the competitive market. Please answer all the parts!
PROBLEM (5) (In a market with demand Q = 780 - p, there are 3 identical firms, A, B and C; each with a total cost function TC(Q) = 3(Q)^2. Calculating the market price under each of the 2 scenarios below, rank/order the Consumer Surplus in each scenario (don’t calculate each CS; just rank them); (i) B and C jointly form the fringe supply and A is the dominant firm in the dominant firm model. (ii) They act as perfectly competitive firms -as if trying to maximize total surplus and minimize DWL- that is, their joint MC serves as the “market supply” for the competitive market. Please answer all the parts!
A firm sells some output in a perfectly competitive market, where the price is $60 per unit, and some on a market in which it has a monopoly, with a demand function p2= 100 - q2, where q2 is output in the monopoly market. Its total-cost function is C= (q1+q2)^2, where q1 is output in the competitive market. Find the profit maximizing outputs in the two markets and discuss the nature of the equilibrium. Suppose now that the price in the competitive market falls to $10. Find the new profit-maximizing solution, and discuss how it compares with the original.
Under pure competition, the supply curve for a certain product is given by: P= Q2 + 100 , the demand curve is given by: Q = 40 - (1/25)P. 1. Using integration, calculate the consumer surplus. 2. Using integration, calculate the producer surplus. 3. Integrate the following: 2x2 ( 14x3 + 167 )0.9 within the range 3 and 9.
given the demand function Pd=25-Q2and supply function Ps = 2Q+1. Assuming pure competition, find the consumer and producer surplus.
Consider the welfare effects when the industry operates under a competitive market versus a monopoly. On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a monopoly controls a market because the resulting equilibrium is different from the competitive outcome, which is efficient. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Price Quantity (Dollars) (Hot dogs) Competitive Monopoly Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a_______________, and the…
Consider the market for bicycles in the fictional province of Westvale. The market demand function for bicycles is given by P=300-2Q. The marginal cost curve for firms in this market is given by P=40+Q. Prices are measured in dollars. a) Under a competitive market equilibrium, what is the price of a bicycle? b) How many bicycles are produced under a competitive market equilibrium? c) Calculate consumer surplus, producer surplus, and total surplus under the competitive market equilibrium Suppose that the firms that were once competing in this market merge into one single firm, forming a monopoly. This monopoly has a marginal revenue function of P=300-4Q. d) What price does this monopolist charge? e) How many bicycles does the monopolist produce? f) Calculate consumer surplus, producer surplus, and total surplus under the monopolistic market outcome g) How much deadweight loss resulted from the creation of the monopolist?
Consider a market with only two firms. The firms operate in a Stackelberg type market where Firm 1 is the follower & Firm 2 is the leader. The market inverse demand function is: P = 120 – 2Q, where Q = q1 + q2. Each firm has a similar cost structure with a marginal cost; MC = 12, though each have different fixed costs; FC1 = 50 & FC2 = 80. Answer the following questions: a. If both firms wish to compete, what is the optimal quantity for each firm (qi) and the market price? b. What are the profits for each firm from the strategy in part a? c. If both firms choose to collude and not directly compete, what is the new price, quantity, and profits for each firm?
A firm with market power faces the demand function q = 2,000- 40P. The firm's marginal cost function isMC(q) = 10 +0.002q.If the firm establishes a block pricing structure with two different prices, identify the two prices the firm will use to maximize producer surplus. Give your answers to two decimal places.P1=________P2=________
Three firms sell identical products in a market with inverse demand given by P(Q) = 590 - 4Q, where Q = q1 + q2 + q3, i.e., the sum of all quantities produced by all three firms. Each firm has a constant marginal cost of production MC = 18 and no fixed cost. Firm 1 chooses q1 first. Firms 2 and 3 simultaneously choose q2 and q3 after observing q1. Calculate the subgame perfect equilibrium profit of firm 2.
Consider a market with demand function P = 12 - 0.04Q and marginal cost function P = 6 + 0.12Q. (a) If this market is perfectly competitive, compute the equilibrium price, the equilibrium quantity, the consumer surplus and the producer surplus in the market. (b) If this market is a monopoly, compute the equilibrium price, the equilibrium quantity, the consumer surplus, the producer surplus and the deadweight loss (if any) in the market. Support your answers for (a) and (b) with one suitable market diagram