9. Antitrust lawsCooperation among oligopolies runs counter to the public interest because it leads to underproduction and high prices. In an effort to bring resourceallocation closer to the social optimum, public officials attempt to force oligopolies to compete instead of cooperating.Consider the following scenario:Suppose that executives working for two different automobile manufacturers exchange emails in which they discuss jointly increasingprices for their latest hybrid electric SUVs.This illegal communication would violate which of the following laws?The Robinson-Patman Act of 1936The Clayton Act of 1914The Sherman Antitrust Act of 1890The Celler-Kefauver Act of 1950

The Sherman Antitrust Act of 1890, the Robinson-Patman Act of 1936, the Clayton Act of 1914, and the…

Answered: 9. Antitrust laws Cooperation among…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Cournot Duopoly: Suppose two firms produce identical products and they have identical constant production costs. When these two firms secretly agree to collude, these firms need to their output level and their price. If the collusion is successful, each firm earns of the monopoly profit. a. Cut; raise; half b. Cut; raise; one-third c. Raise; cut; half d. Raise; cut; one-third
4) Which of the following companies is least likely to operate in an oligopoly? Burger King, which sells fast food Frontier, which provides Internet services AHF pharmacy Verizon, which provides cell phone coverage
8. Two firms, the only firms in the market, sell the same product and have the same marginal cost. They realise they would be better off if they didn't compete with each other. They enter an alternating offers bargaining game to decide how they will divide the monopoly profit, n. They have three periods to come to an agreement. If no agreement is reached after three periods, the firms will compete simultaneously in prices. The firms toss a coin to decide who makes the first offer in the bargaining game. Firm 1 wins and decides to go first. Each firm has a discount factor o. a) Draw the game tree. b) What is the subgame perfect equilibrium when 8 = 0.5? c) What is the equilibrium payoff for each firm? d) Was Firm 1 wise to opt to make the first offer? Explain your answer. %3D
Breakdown of a cartel agreement Consider a town in which only two residents, Darnell and Eleanor, own wells that produce water safe for drinking. Darnell and Eleanor can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. (base to table 1) Suppose Darnell and Eleanor form a cartel and behave as a monopolist. The profit-maximizing price is $_____ per gallon, and the total output is _____ gallons. As part of their cartel agreement, Darnell and Eleanor agree to split production equally. Therefore, Darnell's profit is $_______, and Eleanor's profit is $______. Suppose that Darnell and Eleanor have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Darnell says to himself, "Eleanor and I aren't the best of friends anyway. If I increase my production to 45 gallons more than…
QUESTION 13 Consider a market where two firms (1 and 2) produce differentiated goods and compete in prices. The demand for firm 1 is given by D₁(P₁, P2) = 140 - 2p1 + P2 and demand for firm 2's product is D2 (P1, P2) 140 - 2p2 + P1 Both firms have a constant marginal cost of 20. What is the Nash equilibrium price of firm 1? (Only give a full number; if necessary, round to the lower integer; no dollar sign.)
77
Assume that the market for oil is made up of two firms: Exxon Mobil and Chevron. Also assume that New England has dozens of breweries and each of these make beers with different tastes, colors, and aromas. Which of the following statements is true? The market structure for oil is an oligopoly, and the one for beer is monopolistic competition. The market structure for oil is monopolistic competition, and the one for beer is an oligopoly. The market structure for both oil and beer is an oligopoly. The market structure for both oil and beer is monopolistic competition.
2. Consider the following game: Soapy Inc. and Suddies Inc. are the only producers of soap powder. They collude and agree to share the market equally. If neither firm cheats on the agreement, each makes $1 million profit. If either firm cheats, the cheat makes a profit of $1.5 million, while the complier incurs a loss of $0.5 million. If both cheat, they break even. Neither firm can monitor the other's actions. a) Construct the payoff matrix. b) What is the dominant strategy? c) What is the nash equilibrium for this game?
8. Two firms, the only firms in the market, sell the same product and have the same marginal cost. They realise they would be better off if they didn't compete with each other. They enter an alternating offers bargaining game to decide how they will divide the monopoly profit, n. They have three periods to come to an agreement. If no agreement is reached after three periods, the firms will compete simultaneously in prices. The firms toss a coin to decide who makes the first offer in the bargaining game. Firm 1 wins and decides to go first. Each firm has a discount factor o. a) Draw the game tree. b) What is the subgame perfect equilibrium when o = 0.5? c) What is the equilibrium payoff for each firm? d) Was Firm 1 wise to opt to make the first offer? Explain your answer.
The market demand curve for mineral water is given by P=20 - Q. If there are two firms that produce mineral water, each with a constant marginal cost of 8 per unit, fill in the entries for each of the four duopoly models indicated in the table. (In the Stackelberg model, assume that firm 1 is the leader.) Instructions: Round your answers to 1 decimal place. Model Shared monopoly Cournot Bertrand Stackelberg 21 4.5 92 4.5 01 + 0₂ P 11 1 ग 2 π 1+ 2
Suppose a duopoly market can be modeled as a prisoner’s dilemma. Which of the following statements is correct? Group of answer choices -At the equilibrium, firms produce less total output than if there was a monopoly. Consumers are better off than with a monopoly. -At the equilibrium, firms produce more total output than if there was a monopoly. Consumers are better off than with a monopoly. -At the equilibrium, firms produce the same total output as if there was a monopoly. Consumers are better off than with a monopoly. -At the equilibrium, firms produce more total output than if there was a monopoly. Consumers are worse off than with a monopoly. -At the equilibrium, firms produce the same total output as if there was a monopoly. Consumers are worse off than with a monopoly. -At the equilibrium, firms produce less total output than if there was a monopoly. Consumers are worse off than with a monopoly.

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