Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 13, Problem 4DQ
To determine
Use of non-price competition on price competition.
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Students have asked these similar questions
Rawlding is a manufacturer in the oligopolistically competitive market for footballs. Two other manufacturers, Spaldon and Wilke, compete with
Rawlding for football consumers. Rawlding faces the demand curve for footballs depicted on the graph. Initially, Rawlding charges $30 per football,
producing and selling 7 million footballs per year.
PRICE (Dollars per ball)
36
35
34
33
32
31
30
29
28
27
26
O
7
8
FOOTBALLS (Millions of balls)
9
10
G
As an oligopolist, Rawlding is a price maker. If Rawlding raises the price of its football from $30 to $32 per ball, the quantity of Rawlding footballs
demanded
by million footballs per year. If Rawlding reduces the price of its football from $30 to $28 per ball, the quantity of
by million footballs per year. (Hint: Click on the points on the graph to see their coordinates.)
footballs demanded
If Rawlding raises the price of its football above $30, the kinked demand curve model suggests that Spaldon and Wilke will respond by
The portion of Rawlding's…
Question 2 [JP.14.3.19]
Consider a duopoly where the market demand is described by the equation: P = 150- Q. The marginal
cost for each firm is $60.
lo.] If the firms compete simultaneously with output, what is each firm's profit-maximizing output, the market
quantity, and the price each firm charges?
(b.) What is the economic profit eamed by each firm (from question [a]}
[c.) If Firm 1 is a leader in output, what is each firm's profit-maximizing output, the market quantity, and the
price each firm charges?
[d.] What is the economic profit earned by each firm (from question [c])?
Consider an oligopolistic market with 5 identical firms that choose their profit-maximizing quantities simultaneously. Suppose each firm has constant
marginal costs of $123 per unit and the market elasticity of demand is - 1.08.
What is the change in the prevailing market price if one additional firm joins the market? Assume that the potential entrant is identical to the incumbent
firms.
O A. -7.71
O B. - 5.51
O C. -9.92
O D. - 6.89
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