Quantity (Gallons) Price (Per Gallon)0Total Revenue (and Total Profit)1200NOWN S1011011002010020003090270040803200507035006060360070503500804032009030270010020200011010110012000 Suppose there are two firms, and they are able tocoordinate with each other. What are the expectedprofits for each firm if they successfully collude and splitthe market output equally? The answer has to be anumberlouin which only to trim 1 and 2 stud producer for de her dece how rare pers to pan and bring to town TheTes cenere fr(PriceTest Revenue land Total Pro73༡ བྷསྶཀྐཏྟཊྛགྒཊྛངྒཱཊྛཱརཱབྷིཛྫོ120011010020009327003350007120005338405035003120101302020001109011331304ሰ

To find the expected profits for each firm if they successfully collude and split the market output…

Answered: Quantity (Gallons) Price (Per Gallon) 0…

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term-that the incentives for individual members. to cheat would become too strong. More than fort),r years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? Hint: You may wish to consider non-economic reasons.
Two firms dominate the market for surgical sutures and competeaggressively with respect to research and development. The followingpayoff table depicts the profit implications of their different R&Dstrategies.a. Suppose that no communication is possible between the firms; eachmust choose its R&D strategy independently of the other. Whatactions will the firms take, and what is the outcome?b. If the firms can communicate before setting their R&D strategies,what outcome will occur? Explain.Firm B’s R&D SpendingLow Medium HighLow 8, 11 6, 12 5, 14Firm A’s R&D Medium 12, 9 8, 10 6, 8 SpendingHigh 11, 6 10, 8 4, 6
Suppose three Cournot competitors, each with costs Ci = 30qi, face an inverse market demand curve of P = 480 – 4Q. Suppose merging will not change costs. a. Find profits for the three firms. Note: Don’t round your answers. How will the profits change for F1 and for F2|3 if F2 and F3 merge? b. Suppose that after the merger occurs, F1 and the new firm F2|3 successfully collude at setting the monopoly price and output, and splitting the resulting monopoly profits. How, if at all, does this change the impact of the merger on F1 and on the merged firm?
Firms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?
Suppose oil production in the Gulf of Mexico was a symmetric horizontal oligopoly in Cournot competition. Assume there are two producers, each with a constant marginal cost of production of $50 per barrel. Let the demand function for oil in the region be D(p) = 12000 – 20p, where demand is measured in barrels per day. (You will need to calculate inverse demand from demand before moving on). What would the perfectly competitive equilibrium price and quantity be? What would be the consumer surplus and producer surplus? Draw each firm’s residual inverse demand curve. Calculate the Cournot-Nash equilibrium price and quantity. What is the total consumer surplus, total producer surplus across the two firms, and deadweight loss?
Part d please Suppose four Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Use the formulae given in exercise 8.15 (pgs. 214-15) for firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a. Demonstrate that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Careful: the “n” in the profit formula changes from 4 to 3.) b. Could the merger be profitable i. if fixed costs fell? If so, how much reduction is necessary? ii. If the variable costs of the merged firm fell by 75%, so that C3|4 = 8000 + 15q? (Fixed cost remains 8000 because we are assuming only variable costs fall.) c. Calculate the consumer surplus created in this market when there are four identical firms. How does it change after a merger occurs between F3 and F4 if: i. no costs savings occur ii. the merged firm reduces its fixed costs by $6000 iii. the merged firm…
Return to Figure 9.2. Suppose P0 is $10 and P1 is$11. Suppose a new firm with the same LRAC curve asthe incumbent tries to break into the market by selling4,000 units of output. Estimate from the graph what thenew firm’s average cost of producing output would be.If the incumbent continues to produce 6,000 units, howmuch output would the two firms supply to the market?Estimate what would happen to the market price as aresult of the supply of both the incumbent firm andthe new entrant. Approximately how much profit wouldeach firm earn?
Isabella runs an IT solutions business for her college peers and has only one competitor, Franco.Isabella and Franco have decided to collude andprovide monopoly-level output. Given that theyare both freshmen and intend to run their businesses for the next three years, is this agreementsustainable? Would your answer change if Francoknew he planned to transfer to another collegenext year?
Two firms with differentiated products are competing in price. Firm A and B face thefollowing demand curves: Q_A = 70 − 2P_A + P_B and Q_B = 120 − 2P_B + P_Arespectively. Assume production is costless.a. Give equations for and graph each firm’s reaction curve.b. If both firms set their prices at the same time, what is the Nash equilibriumprice, quantity, and profit for each firm?c. Suppose A sets its price first and then B responds. What price and quantitydoes each firm set now? Is it advantageous to move first?d. Compare the profits from part b and c. Which firm benefits more from thesequential price choosing? (Please do b-d, thanks :))
There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete
COURSE: MICROECONOMICS - Cournot Model:In the market for a given good there are only 2 firms satisfying the demand, and their respective total cost functions respond to the form: CTi = 10Qi + 5 and the demand is estimated to be: P = 31 - QIf the decision variable for both firms is that the quantity they will produce and realize will be decided simultaneously it is asked to:(a) calculate the profit and reaction function of each firmb) graph market equilibriumc) calculate the profits that both companies will obtain in equilibrium
Part b please Suppose four Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Use the formulae given in exercise 8.15 (pgs. 214-15) for firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a. Demonstrate that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Careful: the “n” in the profit formula changes from 4 to 3.) b. Could the merger be profitable i. if fixed costs fell? If so, how much reduction is necessary? ii. If the variable costs of the merged firm fell by 75%, so that C3|4 = 8000 + 15q? (Fixed cost remains 8000 because we are assuming only variable costs fall.) c. Calculate the consumer surplus created in this market when there are four identical firms. How does it change after a merger occurs between F3 and F4 if: i. no costs savings occur ii. the merged firm reduces its fixed costs by $6000 iii. the merged firm…

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