Please explain briefly in your own words why firms in perfect competitive markets are price takers while a monopoly firm is a price maker. Also comment on the size of the consumer and producer surplus in both market structures.
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- In India, Cisco’s market share of the Ethernet switch and router market is approximately 67 percent. Juniper and HP each have market shares of about 6.5 percent, and several other firms have somewhat smaller market shares. Draw a diagram showing the equilibrium in this dominant firm market. Identify the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms. Illustrate what happens to the equilibrium price and the equilibrium quantity produced by the dominant firm and the competitive fringe firms if additional fringe firms enter the marketSort the following characteristics by whether they describe competitive markets, firms that can perfectly price-discriminate, both, or neither. Items (4 items) (Drag and drop into the appropriate area below) result in some deadweight loss Categories zero economic profit in the long run Competitive market Drag and drop here maximize total surplus Perfect price discrim. Drag and drop here eliminate consumer surplus Both Drag and drop here Neither Drag and drop hereSuppose a country's mobile phone industry is supplied by only two firms (i.e. an oligopoly). Explain how the presence of two firms affects the price elasticity of demand of each firm's output.
- Given the information in the table, if a movie theater does not price discriminate, then it charges either the highest price the college students are willing to pay or the one that the senior citizens are willing to pay. The theater would practice price discrimination by charging college students $16 and senior citizens $8. Assume the firm incurs no fixed costs and the marginal cost of production is zero. How does total surplus change if the movie theater goes from charging a single price to perfectly price discriminating? Profit from 15 College Profit from 10 Senior Total Students $120 $240 $240 Citizens Profit $200 Uniform, $8 Uniform, $16 Price Discrimination $80 $80 $320 The change in total surplus from practicing perfect price discrimination instead of charging a single price is s (Enter your response rounded to the nearest whole number)Price-discriminating firm Cho owns a plot of land in the desert that isn’t worth much. One day, a giant meteor falls on her property. The event attracts scientists and tourists, and Cho decides to sell nontransferable admission tickets to the meteor crater to both types of visitors: scientists (Market A) and tourists (Market B). The following graphs show demand (D) curves and marginal revenue (MR) curves for the two markets. Cho’s marginal cost of providing admission tickets is zero. I hope you can see a clear picture.Sort the following characteristics by whether they describe competitive markets, firms that can perfectly price discriminate, both, or neither.
- The figure below illustrates the market for steel. If the steel market is competitive, firms can produce steel at a constant marginal cost of $100 per ton. Therefore, the price of steel is $100 per ton, and 100 tons are produced. Assume that if all the steel companies consolidate into a monopoly, the monopoly marginal cost will fall to $70 per ton. Use the straight line tool to draw the monopoly marginal revenue and marginal cost lines (extend the marginal cost line to 300 tons). Then use the plot point tool to plot the monopoly profit maximizing price and output on the demand curve. Part 2. If the market is competitive, total surplus is $ _________ Part 3. If the market is controlled by a monopoly, total surplus is $________Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. PRICE (Dollars per pound) 100 90 80 70 80 50 40 30 20 10 0 0 125 250 375 500 825 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) Demand Because you know that competitive firms earn Supply (10 firms) True Supply (15 firms) If there were 10 firms in this market, the short-run equilibrium price of rhodium would be $ would . Therefore, in the long run, firms would False Supply (20 firms) per pound. From the graph, you can see that this means there will be ? per pound. At that price,…- 1 2 3 4 5 6 7 8 9 10 Consider a market in which three firms compete as quantity setters (i.e. firms are engaged in Cournot competition), and the market demand curve is given by Q= 6,000-10P. All firms have constant marginal cost equal to 100. In equilibrium, quantity supplied by each firm and the price are: Q-5000 and P = 100 Q=1000 and P = 200 Q=2500 and P = 225 Q=1250 and P = 225 Widget Widget is a commodity that is traded in a perfectly competitive global market that consists of many small price-taking firms. The firms fall in three categories with the following characteristics: Number of firms Type 1 Type 2 Type 3 100 100 50 Capacity of firm's plant (units per year) 120 units 100 units 100 units AVC ($ per unit) 20 30 30 Fixed cost per unit at full capacity ($/unit) 25 35 50 • Assume that each firm's AVC is constant up to the capacity of its plant. Further, assume that once built, a firm's plant has zero redeployment value. Finally, assume that a typical entrant has a cost…
- Blue INK is the only cabel service provider in Gazipur. The diagram below depicts the price, output and costs incurred by Blue INK. Use the graph to answer the following questions: 1. What is the Total revenue generated by Blue INK at the profit maximizing level of output? 2. If the Cable Service Market turns into a Perfectly Competitive Market, what will be the total ammount of the service provided? 3. If the market turns into a Monopoly market again, what will be the total deadweight loss created?Suppose that you are a manager for a firm like EBC Brakes, which manufactures brakes for automobiles and motorcycles. Your company has two plants, one in the United States and the other in the United Kingdom. The following tables include estimated demand and marginal revenue for your brakes, along with the marginal costs at the two factories. what quantity and price maximize your firms profit? What is the profit – maximizing number of brakes produced in the U.S. plant? In the U.K. plant? Quantity Demanded (brakes per hour) Price (dollars per brake) Quantity Produced in the U.K. plant (brakes per hour) Quantity Produced in the U.S. (brakes per hour) Total Quantity Produced Marginal Cost (dollars per brake) Marginal Revenue (dollars per brake) 104 196 47 42 89 66 92 105 195 48 44 92 68 90 106 194 49 46 95 70 88 107 193 50 48 98 72 86 108 192 51 50 101 74 84 109 191 52 52 104…Q3. There are two firms selling differentiated products. Firm A faces the following demand for his product: e, = 20 – -P, + -P, 2. Firm B faces the following demand: 1 P. +-P, 2. 0, = 220- Assume that the marginal cost is zero both for firm A and firm B. What are the equilibrium prices of a simultaneous price competition? What would the equilibrium prices be if A is the leader and B is the follower?