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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Which of the follow industries is the best example of an existing cartel?
Group of answer choices
Microsoft and Apple—two of the largest computer manufacturers
Verizon and AT&T—two of the largest American mobile phone service providers
GM, Chrysler, Ford—The big three American automobile companies
OPEC, the Organization of Petroleum Exporting Countries
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- Suppose Farmer Smith from Kansas and Farmer Jones from Missouri agree to restrict their combined output of wheat in an attempt to increase the price and profits. How likely do you think the Smith–Jones cartel is to succeed? Explain.arrow_forwardSuppose that all firms in an industry collude to reduce output, which raises the product price to $7.86 and requires the perfectly competitive firm in the figure to the right to reduce its output from 500 units to 200 units. What is the total dollar amount of this typical perfectly competitive firm's economic incentive to join the proposed cartel, assuming that after the fact, no firms cheat on the specified cartel agreement? Explain your reasoning. In the absense of collusion among the firms, the typical perfectly competitive firm's economic profits are average total cost. because price Using the rectangle drawing tool, show the amount of economic profits for the typical perfectly competitive firm if it joins the cartel Label this area 'Profits." Carefully follow the instructions above, and only draw the required object If ATC $5.33 at the reduced output of 200 units, then the typical firm's economic incentive to participate in the cartel is $(Enter your response as a whole number.)…arrow_forwardConsider a duopolistic market with an inverse demand curve P(Q) = 460 − 4Qand constant marginal costs for each firm that are given by MC(Q) = 10.Assume fixed costs are negligible. The two identical firms are competing in this market by choosing their production quantities simultaneously. In the equilibrium, each firm produces 37.5 units and the prevailing market price is 160. How would the joint profits of these two firms change if they successfully formed a cartel? Change in joint profits: ? (Enter your answer rounded to two decimal places; include a negative sign if appropriate.)arrow_forward
- Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the short-run Phillips curve that is consistent with these expectations, assuming that it is parallel to SRPC₂- Finally, using the orange point (square symbol labeled "C"), indicate on the previous graph the new, long-run equilibrium for this economy. The inflation rate at point C is unemployment rate at point A. the inflation rate at point A, and the unemployment rate at point C is Was the central bank able to achieve its goal of lowering…arrow_forwardAirline Manufacturer A and Airline Manufacturer B are duopolists in their industry. Explain how the two firms could collectively benefit if they were to collude and form a cartel. Why might collusion be difficult?arrow_forwardHow do you analyze how Winn-Dixie oligopolies position themselves to be successful?arrow_forward
- Which of the following hypothetical markets would be best modeled as a Stackelberg oligopoly? A town containing several restaurants, each serving a different type of cuisine. A town containing many independent coffee shops with very similar menus. A town containing several banks offering identical services, although one bank has been open in this town far longer than the others. An industry containing several factories capable of producing exactly the same product and that bid for manufacturing contracts. A county containing several farms that grow the same crops, which are all sold at the same time at the end of harvest.arrow_forwardSet-up the Oligopoly model in a game theoretical prisoner’s dilemma framework. Explain briefly the strategies and how you reach the Nash Equilibrium.arrow_forwardRussia, Iran and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel for natural gas. Each of the countries can comply with the cartel agreement or to cheat on the cartel agreement. If all countries comply, the economic profit for each will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other countries will have economic losses of $10 million. If all countries cheat, they break even. What are the strategies in this game? Earn between $140 and $200 million in profits. Cheat on the cartel agreement and earn -$10 million in profits. Comply with the agreement and earn $140 million in profit. Comply with the cartel agreement or to cheat on the cartel agreement.arrow_forward
- Isolated Island has two wind turbines producing electricity, one owned by Dick and the other owned by Harry. Quantity demanded (units per day) Price (dollars per unit) The marginal cost of producing electricity is $4 a unit. 12 11 1 The table gives the demand schedule for electricity in this area. 10 2 9 3 If Dick and Harry form a cartel and maximize their joint profit, what will be the price of electricity and the total quantity produced? 8 4 7 5 If Dick and Harry form a cartel and maximize their joint profit, the price of a unit of electricity is $ and the quantity produced is units a day. 6 7arrow_forwardIf in theory collusion is good for the members of a cartel, give at least three reasons why in practice collusion is not widespreadarrow_forwardCS 25 Economicsarrow_forward
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