Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 15, Problem 10APA
To determine
Identify the payoff matrix for the two players.
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What are the main characteristics of oligopoly? How does output and price compare to that of perfect competition?
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1. Tru and Merritts Grill compete in the sandwich market. They are trying to decide how to price their sandwiches. The potential market is 100 customers a day. If both firms price high at $12 a sandwich, some customers won’t want to buy but 80 still will consume, and the shops will equally split the market. If one firm prices high at $12 and one prices lower at $7, the shop that prices lower will receive all the business of 100 consumers and the high price shop will receive no business. If both shops price low at $7, then the shops will split the 100 consumers. Let’s simplify to both firms’ cost=0
a) The payoffs to each action are in the form of profit to each firm. Construct a matrix with the correct payoffs. Make sure to identify the Nash equilibrium/equilibria.
Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1RQCh. 15.1 - Prob. 2RQCh. 15.1 - Prob. 3RQCh. 15.1 - Prob. 4RQCh. 15.2 - Prob. 1RQCh. 15.2 - Prob. 2RQCh. 15.2 - Prob. 3RQCh. 15.2 - Prob. 4RQCh. 15.2 - Prob. 5RQCh. 15.2 - Prob. 6RQ
Ch. 15.3 - Prob. 1RQCh. 15.3 - Prob. 2RQCh. 15.4 - Prob. 1RQCh. 15.4 - Prob. 2RQCh. 15.4 - Prob. 3RQCh. 15.4 - Prob. 4RQCh. 15.4 - Prob. 5RQCh. 15 - Prob. 1SPACh. 15 - Prob. 2SPACh. 15 - Prob. 3SPACh. 15 - Prob. 4SPACh. 15 - Prob. 5SPACh. 15 - Prob. 6SPACh. 15 - Prob. 7SPACh. 15 - Prob. 8SPACh. 15 - Prob. 9APACh. 15 - Prob. 10APACh. 15 - Prob. 11APACh. 15 - Prob. 12APACh. 15 - Prob. 13APACh. 15 - Prob. 14APACh. 15 - Prob. 15APACh. 15 - Prob. 16APACh. 15 - Prob. 17APACh. 15 - Prob. 18APACh. 15 - Prob. 19APACh. 15 - Prob. 20APACh. 15 - Prob. 21APACh. 15 - Prob. 22APACh. 15 - Prob. 23APA
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- Which of the following apply to oligopoly industries? Select one or more answers from the choices shown. a. A few large producers. b. Many small producers. c. Strategic behavior. d. Price taking.arrow_forward18. Refer to Figure 18-1. If the shop charges $150 per repair, then what is the value of the marginal product of the second mechanic? 19. Refer to Figure 18-1. What is the marginal product of the third mechanic? 20. Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?arrow_forward17. There are two firms selling smartphones (oligopoly market), Firm A and Firm B. Each can set their price high or low. a. If each firm was acting independently, what strategy would each firm take? b. How much would each firm make given their independent strategies? c. If the two firms colluded, what strategy would each firm take? d. How much would each firm make given that the firms collude? A Price High A Price Low $57 mil $59 mil B Price High $60 mil $55 mil B Price Low $69 mil $50 mil $55 mil $58 milarrow_forward
- Bud and Wise are the only two producers of mango Juice. Bud and Wise are trying to figure out how much of mango Juice to produce. They know: ● If they both limit production and produce 10,000 gallons a day, they will make the maximum attainable joint economic profit of $200,000 a day, or $100,000 a day each. • If either firm expands production and produces 20,000 gallons a day while the other limits production and produces 10,000 a day, the one that produces 20,000 gallons will make an economic profit of $150,000 and the other will incur an economic loss of $50,000. • If both expand production and produce 20,000 gallons a day, each firm will make zero economic profit. Find the Nash equilibrium of the game that Bud and Wise play. The Nash equilibrium is for both Bud and Wise to limit production. The Nash equilibrium is for both Bud and Wise to expand production. The Nash equilibrium is for Wise to limit production and for Bud to expand production. The Nash equilibrium is for Bud to…arrow_forwardCite an example of an oligopolistic industry in the Philippines and discuss how these oligopolists behave and interact with each other in the industryarrow_forward17 Fill in the blank with the correct answer by typing in the box. Some oligopoly firms compete too hard, so that they all end up earning economic profits.arrow_forward
- Again, please consider this table, which describes a firm that is part of an oligopoly: Marginal Quantity Price Total Cost Cost Total Revenue Marginal Revenue Profit/Loss 100 $4 $120 200 $3 $320 A 300 $2.50 $570 400 $2 $870 B C Carefully following numeric instructions, enter the value for Cell B.arrow_forwardif two firms (firm A and firm B) are competing selling T-shirts, both at $12 per shirt, both have a quantity of 50 and both can produce a t-shirt at a cost of $2 per shirt both marginal and average. If both companies are competing directly against each other in prices, what will the new marginal price of company B will be? and what will be their profits? Also, how do you solve the equilibrium price in oligopolies?arrow_forwardWhich of the following industries are examples of oligopolistic industries in the U.S.? Choose all that apply. A. pharmaceutical industry B. automobile industry C. utility providers D. telecommunications industryarrow_forward
- Once more, please consider a market with eight producers that produce a total of 30,000 units. Their output is broken down below: Firm's Firm Output One 7400 Two 1800 Three 4100 Four 5200 Five 1400 Six 2800 Seven 6600 Eight 700 According to our lecture, this industry likely to be an oligopoly because is not; a small number of firms produce a large amount of the output O is; a small number of firms produce a large amount of the output O is not; production is spread out among relatively many firms is; production is spread out among relatively many firmsarrow_forwardSister's Kennedy and Kiera own and run the only nail salon in Smithville, Alaska. They have different strategies for how to run the business. Kennedy wants to focus on meeting market demand and bringing in as much revenue as possible. She wants to charge $18 per manicure and sell 140 manicures per month. Kiera wants to make the largest possible profit, charging $25 per manicure and selling only 100 per month. Using a single market structure graph for the nail salon, show the difference between the price and quantity combinations favored by Kennedy and Kiera. Explain whose strategy you recommend they follow and why? Draw graph on a piece of paper Clearly label all axes and lines. Include all relevant details. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward25. Figure 1.7 represents an oligopoly firm. The existing price and quantity are $10 and $2,000 units. If we assume that rival firms match price decreases but not price increases, the firm's demand curve will most likely be (from left to right)... Figure 1.7 DI D2 D2 DI 2000 QUANTITY a. D,ED, b. D2ED2 c. D¡ED2 d. D2ED1arrow_forward
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