The graph below shows a duopolistic market. The firms in this market produce and sell identical products. The graph below shows the market demand, a corresponding marginal revenue curve for the product, and an identical marginal cost curve for each firm. Assume both firms have the goal of maximising economic profit. If the two firms were to collude, what would be the total economic profit made by each firm? Price($) $8 O SO 10 9 8 7 6 5 4 3 2 1 0 0 1 2 3 4 O $24 O $6 O Insufficient information to determine economic profit of each firm O $16 MR 5 6 7 8 9 MC D 10 Quantity
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- Rawlding is a manufacturer in the oligopolistically competitive market for footballs. Two other manufacturers, Spaldon and Wilke, compete with Rawlding for football consumers. Rawlding faces the demand curve for footballs depicted on the graph. Initially, Rawlding charges $30 per football, producing and selling 7 million footballs per year. PRICE (Dollars per ball) 36 35 34 33 32 31 30 29 28 27 26 O 7 8 FOOTBALLS (Millions of balls) 9 10 G As an oligopolist, Rawlding is a price maker. If Rawlding raises the price of its football from $30 to $32 per ball, the quantity of Rawlding footballs demanded by million footballs per year. If Rawlding reduces the price of its football from $30 to $28 per ball, the quantity of by million footballs per year. (Hint: Click on the points on the graph to see their coordinates.) footballs demanded If Rawlding raises the price of its football above $30, the kinked demand curve model suggests that Spaldon and Wilke will respond by The portion of Rawlding's…Suppose that an oligopolistic is charging $21 per unit of output and selling 31 units each day. What is its daily total revenue? Also suppose that previously it had lowered its price from $21 to $19, rivals matched the price cut, and the firmâs sales increased from 31 to 32 units. It also previously raised its price from $21 to $23, rivals ignored the price hike, and the firmâs daily total revenue came in at $482. Which of the following is most logical to conclude? The firmâs demand curve is (a) inelastic over the $21 to $23 price range, (b) elastic over the $19 to $21 price range, (c) a linear(straight) down sloping line, or (d) a curve with a kink in it?The graph below shows a demand curve for a firm operating in an oligopolistic market. Kinked Demand Price 100 90 80 70 MC 60 50 40 30 20 10 MR D 10 20 30 40 60 70 80 90 100 Quantity Compared to a price of $75, at a price of $60 demand is O relatively more elastic. O relatively more inelastic. O perfectly elastic. O perfectly inelastic.
- Consider two firms that produce identical products in a situation of duopoly. The two firms have the same marginal cost. Which of the following statements is true: O Under Cournot competition, the equilibrium price is lower than the equilibrium price under Bertrand competition O Under Cournot competition, the equilibrium price will be at the same level as the equilibrium price under perfect competition Under Cournot competition, the equilibrium price will be at the same level as the price under a monopoly O Under Bertrand competition, the equilibrium price will be at the same level as the equilibrium price under perfect competition O The two firms will end up producing different levels of outputThe graph shows the demand curve for cars in 2017. Suppose that the least-possible cost of producing a car is $10,000 and that the efficient scale is 10,000 cars a month. Draw the average total cost curve for a car manufacturer in 2017. Label it. The graph shows that the market for cars is a natural oligopoly with O A. 1 firm OB. 2 firms OC. 3 firms OD. 4 firms 50,000- 40,000- 30,000- 20,000- 10,000- 0- Price (dollars per car) 0 D 30 Quantity (thousands of cars per month) >>> Draw only the objects specified in the question. 50 QConsider an oligopolistic market with 5 identical firms that choose their profit-maximizing quantities simultaneously. Suppose each firm has constant marginal costs of $123 per unit and the market elasticity of demand is - 1.08. What is the change in the prevailing market price if one additional firm joins the market? Assume that the potential entrant is identical to the incumbent firms. O A. -7.71 O B. - 5.51 O C. -9.92 O D. - 6.89
- Two firms produce identical products at zero cost, and theycompete by setting prices. If each firm charges a low price,then both firms earn profits of zero. If each firm charges ahigh price, then each firm earns profits of £30. If one firmcharges a high price and the other firm charges a low price,the firm that charges the lower price earns profits of £50, andthe firm charging the higher price earns profits of zero. (a) Which oligopoly model best describes this situation?(b) Write this game in normal form.(c) Suppose the game is infinitely repeated. Can theplayers sustain the "collusive outcome" as a Nashequilibrium if the interest rate is 50 percent? Explain. Please answer the a, b and c parts.Refer to the figure at right. Two firms operating in the same market must choose between a collude price and a cheat price. Firm A's profit is listed before the comma, B's outcome after the comma. If each firm tries to choose a price that is best for it, regardless of the other firm's price, which of these statements is correct? O A. Both firms should charge a cheat price. OB. Firm A should charge the collude price; Firm B should charge a cheat price. C. D. Both firms should charge a collude price. Firm A should charge a cheat price; Firm B should charge a collude price. Cheat Price Firm A Firm B Cheat Price Collude Price Collude Price 18, 18 6,30 30,6 24, 24At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, “ . . . for the past several years, our individual company growth has come out of the other fellow’s hide.” Kellogg’s has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg’s and its largest rival advertise, each company earns $0 billion in profits. When neither company advertises, each company earns profits of $8 billion.If one company advertises and the other does not, the company that advertises earns $43 billion and the company that does not advertise loses $4 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising?Instruction: Enter your response as a percentage rounded to the nearest whole number.i ≤ percent
- At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, “ . . . for the past several years, our individual company growth has come out of the other fellow’s hide.” Kellogg’s has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg’s and its largest rival advertise, each company earns $2 billion in profits. When neither company advertises, each company earns profits of $16 billion.If one company advertises and the other does not, the company that advertises earns $56 billion and the company that does not advertise loses $4 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising?Instruction: Enter your response as a percentage rounded to the nearest whole number.Think about firms such as the Coca Cola Company and PepsiCo who competeagainst each other in the monopolistically competitive market for soft drinks. Eachfirm produces a unique product, but each of these unique products is to some extenta substitute for the soft drinks produced by rival companies.Now imagine a situation where the firms within such a market are facing suchextreme competition that they are unable to make an operating profit. Characterisethis situation diagrammatically and explain what will happen to the market, payingparticular attention to the exit or entry of firms out of (or into) the market.Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. 100 90 Mon Comp Outcome 80 70 60 Min Unit Cost 50 ATC 40 30 20 10 MC MR Demand 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of bats) PRICE (Dollars per bat)