Question 2Consider an agricultural-based economy where there are many farmers planting tobaccoplants in small pieces of land using an identical farming method. The famer will harvestthe tobacco leaves and sell to a large number of cigarette manufacturers as raw materialsof cigarettes. The price of tobacco leave is determined by the market demand and supplyand no single farmer or manufacturer can influence the price. Each farmer has noproblem selling all the tobacco leaves at the market equilibrium price.(a)(b)(c)Examine the structure of the tobacco leave market and support your answers with asuitable tobacco leave market and also examine the structure of market for an individualtobacco farmer, assuming all tobacco farmers are earning a normal profit initially.Eventually it is discovered that smoking cigarettes is linked to many diseases. Appraisethe short run and the long run effects of such information on the tobacco leave marketas well as the market for the individual tobacco farmer following this discovery.Two airlines, Dragon Airline and Phoenix Airline, provide direct flight service to a cityand tend to compete for the same group of travellers. They are contemplating changingtheir airfares to earn more profit. If both airlines raise their airfares, Dragon Airline willearn $800m while Phoenix Airline will earn $400m in profit. If both airlines reducetheir airfares, Dragon Airline will earn $650m while Phoenix Airline will earn $550min profit. If Dragon Airline raises its airfare while Phoenix Airline reduces its airfare,Dragon Airline will earn $200m while Phoenix Airline will earn $350m in profit. IfDragon Airline reduces its airfare while Phoenix Airline raises its airfare, DragonAirline will earn $300m while Phoenix Airline will earn $250m in profit.Construct the payoff matrix in terms of profit for the two pricing strategies. Apply agame theory concept and solve this game using the Nash equilibrium method. Explainhow you derive your answers and also whether this game is a prisoner's dilemma game.How will your answer be different if the game become a sequential game and PhoenixAirline gets to move first? Explain your answers by constructing a suitable decision treediagram, employ the roll back method to solve the sequential game.Refer to the characteristics of perfect competition and examine the hawker industry inSingapore. Do you consider the hawker industry in Singapore perfectly competitive?Justify your answers.

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(a) Consider an agricultural-based economy where there are many farmers planting tobacco plants in small pieces of land using an identical farming method. The famer will harvest the tobacco leaves and sell to a large number of cigarette manufacturers as raw materials of cigarettes. The price of tobacco leave is determined by the market demand and supply and no single farmer or manufacturer can influence the price. Each farmer has no problem selling all the tobacco leaves at the market equilibrium price. Examine the structure of the tobacco leave market and support your answers with a suitable tobacco leave market and also examine the structure of market for an individual tobacco farmer, assuming all tobacco farmers are earning a normal profit initially. Eventually it is discovered that smoking cigarettes is linked to many diseases. Appraise the short run and the long run effects of such information on the tobacco leave market as well as the market for the individual tobacco farmer following this discovery.

(a) Consider an agricultural-based economy where there are many farmers planting tobacco plants in small pieces of land using an identical farming method. The famer will harvest the tobacco leaves and sell to a large number of cigarette manufacturers as raw materials of cigarettes. The price of tobacco leave is determined by the market demand and supply and no single farmer or manufacturer can influence the price. Each farmer has no problem selling all the tobacco leaves at the market equilibrium price. Examine the structure of the tobacco leave market and support your answers with a suitable tobacco leave market and also examine the structure of market for an individual tobacco farmer, assuming all tobacco farmers are earning a normal profit initially. Eventually it is discovered that smoking cigarettes is linked to many diseases. Appraise the short run and the long run effects of such information on the tobacco leave market as well as the market for the individual tobacco farmer following this discovery.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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