ECON 111 – Problem Set 5: Oligopoly and Monopolistic Competition<\/p>\n
Question 1: The figure below represents Tony\u2019s Pizza Parlor, a firm in monopolistic competition.<\/p>\n
a.\tWhat price will Tony charge in this market? What is the output Tony is producing?
\nb.\tAt the profit maximizing level of output, what is Tony\u2019s total revenue of production? Cost of production?
\nc.\tShade the area that represents consumer surplus.
\nd.\tShade the area that represents profits.
\ne.\tIs this a long-run equilibrium? Why or why not?<\/p>\n
Question 2: Consider a small town that has two grocery stores from which residents can choose to buy a candy. The store owners each must make a decision to set a high candy price or a low candy price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Claudia, Julio).<\/p>\n
a.\tRefer to the scenario above. Does Claudia\u2019s Confections have a dominant strategy? If so what?
\nb.\tRefer to the scenario above. Does Julio\u2019s Jellies have a dominant strategy? If so what?
\nc.\tIs there a Nash Equilibrium for this game? If so, what is it?<\/p>\n
Question 3: Duff Beers and Three Broomsticks Butter Beers are beer companies that operate in a duopoly. The daily marginal cost of producing a bottle of beer is constant and equals $1.20 per bottle. Assume that neither firm had any start up costs, so marginal cost equals average total costs for each firm. Suppose Duff and Three Broomsticks form a cartel and the firms divide output and profits equally.<\/p>\n
a.\tIndicate the profit-maximizing price and combined quantity of output if Duff and Three Broomsticks choose to work together on the graph above.
\nb.\tWhen they act as a single profit-maximizing cartel, each company will produce ___________ bottles and charge ____________ per bottle. Given this information, each firm earns a daily profit of ____________, so the total industry profit in the beer market is ___________.
\nc.\tAgain, assume the two companies form a cartel and decide to work together. Both firms initially agree to produce half the quantity that maximizes total industry profit. Now, suppose that Duff decides to break the collusion and increase its output double its original units, while Three Broomsticks continues to produce the amount set under the collusive agreement.<\/p>\n
Duff\u2019s deviation from the collusive agreement causes the price of a bottle of beer to (increase\/decrease) to ___________ per bottle. Duff\u2019s profit is now ____________, while Three Broomstick\u2019s profit is now ____________. Therefore, you conclude that total industry profit (increases\/decreases) when Duff increases its output beyond the collusive quantity.
\nd.\tSuppose that the only barrier to entry protecting Duff and Three Broomsticks was a patent and it has expired, causing the market to be flooded with many competitors. The market would produce a total of _________ units. The profit for each firm would be __________. Outline the new consumer surplus in this situation.<\/p>\n
Question 4: Opinion Piece
\nPlease read the following on Blackboard:<\/p>\n
\u2022\t\u201cAmerica has an oligopoly problem\u201d
\n\u2022\t\u201c15 Oligopoly advantages and disadvantages\u201d<\/p>\n
Do you think America has an oligopoly problem? It is true many industries are becoming oligopolistic but R&D, one of the benefits of an oligopoly, is the highest it has ever been. However formation of oligopolies can come at the cost of higher inequality. Do you think the U.S. should have stricter anti-trust laws or do you think the benefits of oligopolies outweigh the costs?<\/p>\n","protected":false},"excerpt":{"rendered":"
ECON 111 – Problem Set 5: Oligopoly and Monopolistic Competition Question 1: The figure below represents Tony\u2019s Pizza Parlor, a firm in monopolistic competition. a.\u2026<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9443,9501],"tags":[],"class_list":["post-115869","post","type-post","status-publish","format-standard","hentry","category-phd-dissertation-help-service","category-do-my-assignment-paper"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/115869","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=115869"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/115869\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=115869"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=115869"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=115869"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}