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 14, Problem 3DQ
Sub part (a):
To determine
Oligopoly payoff matrix.
Sub part (b):
To determine
Oligopoly payoff matrix.
Sub part (c):
To determine
Oligopoly payoff matrix.
Expert Solution & Answer
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The graph below shows a duopolistic market. The firms in this market produce and sell identical products. The graph below shows the market demand, a corresponding marginal revenue curve for the product, and an identical
marginal cost curve for each firm. Assume both firms have the goal of maximising economic profit. If the two firms were to collude, what would be the total economic profit made by each firm?
O O O
$24
$6
$16
$8
Price ($)
10
9
8
7
$0
6
5
4
3
2
1
0
0
Insufficient information to determine economic profit of each firm.
1
2 3 4
MR
5
6
7 8
9
MC
D
10
Quantity
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
QUESTION 4
If Bertrand duopolists respectively have marginal costs of 10 (firm 1) and 8 (firm 2), which of the prices below can arise in Nash equilibrium?
(Assume that prices must be quoted in full cents, e.g. $0.99 or $1, but $0.995 is not possible. If prices are equal, half of the customers buy from
each firm.)
O Both firms charge $8.01.
Firm 1 charges $10 and firm 2 charges $8.
Both firms charge $9.
Firm 1 charges $10 and firm 2 charges $9.99.
Chapter 14 Solutions
Microeconomics
Ch. 14.2 - Prob. 1QQCh. 14.2 - The D2e segment of the demand curve D2eD1 in graph...Ch. 14.2 - Prob. 3QQCh. 14.2 - Prob. 4QQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQ
Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3P
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Similar questions
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- Suppose that there are two firms producing a homogenous product and competing in Cournot fashion and let the market demand be given by Q = 240- Assume for simplicity that each firm operates with zero total cost. Find each firm's Cournot Nash equilibrium profit for each firm. $21600 O $19200 O $18000 O $16000arrow_forwardWhile there is a degree of differentiation between major grocery chains like Albertsons and Kroger, theregular offering of sale prices by both firms for many of their products provides evidence that these firmsengage in price competition. For markets where Albertsons and Kroger are the dominant grocers, thissuggests that these two stores simultaneously announce one of two prices for a given product: a regularprice or a sale price. Suppose that when one firm announces the sale price and the other announces theregular price for a particular product, the firm announcing the sale price attracts 1000 extra customers toearn a profit of $5000, compared to the $3000 earned by the firm announcing the regular price. Whenboth firms announced the sale price, the two firms split the market equally (each getting an extra 500customers) to earn profits of $2000 each. When both firms announced the regular price, each companyattracts only its 1500 loyal customers and the firms each earned $4500 in…arrow_forwardWhat is a feature common to both Monopolistic-Competition and Oligopoly type of markets? O productive efficiency will occur in both the short run and long run, a desirable economic property of markets. many smaller sized firms can produce the good or service at lower cost per unit than larger sized firms, thus large firms fail in the long run. the demand curve for each firm is not going to be purely elastic, because products are at least slightly different than potential rival firms' product and/or there may be some consumer brand loyalty. Firms in both types of markets eventually will be broken up by government anti-trust laws and regulations. MacBook Pro く※ G Search or type URL 6 7 8. 3 4. W Earrow_forward
- Ma3. You operate in a duopoly in which you and a rival must simultaneously decide what price to charge for the same homogeneous product. Assume each you and your rival can choose a “low price” or a “high price”. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3 million. If you charge different prices, the one charging the high price loses $5 million and the one charging the low price makes $5 million. What is the Nash equilibrium for the non-repeated version of this game? Now suppose the game is infinitely repeated. If the interest rate is 10%, can you do better than you could in the non-repeated version of this game? If your answer is “yes”, provide the players’ strategies and any other conditions that must hold.arrow_forward11 21. Imagine an N firm oligopoly for "nominally differentiated" goods. That is, each of the N firms produces a product that "looks" different from the products of its competitors, but that "really" isn't any different. However, each firm is able to fool some of the buying public. Specifically, each of the N firms (which are identical and have zero marginal cost of production) has a captive market -consumers who will buy only from that firm. The demand generated by each of these captive markets is given by the demand function Pn A- Xn , where Xn is the amount supplied to this captive market and Pn is the price of the production of firm n. There is also a group of intelligent consumers who realize that the products are really undifferentiated. These…arrow_forward18. Answer the next question based on the payoff matrix for a two-firm oligopoly where the numbers represent the firms' respective profits given each of their pricing strategies: FIRM Y O $ 800,000 O $1,000,000 O $1,450,000 Strategies: High-price If both firms collude to maximize joint profits, O $1,250,000 FIRM X High-price X = $625,000 Y = $625,000 Low-price X = $275,000 Y = $725,000 Low Price X = $725,000 Y = $275,000 X = $400,000 Y = $400,000 tal profits for the two firms will be:arrow_forward
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