Homework Answers
Answer - Monopoly market structure is folowed by the firms in oligopoly when they form the cartel. The firms in cartel decide upon the price and output mutually and are not the price takers. They are price markers now jist like monopoly. They have their barriers to entry and earn profits. Hence they tend to follow the monopoly market.
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Suppose firms in an oligopoly decide to form a cartel. Which market type will they try...
Suppose that Airbus and Boeing decide to form a cartel. Is it likely that they both...
Suppose that Airbus and Boeing decide to form a cartel. Is it
likely that they both stick to an agreement where each of them
produces equal quantities in order to maximize total revenue? In
other words, does a formation of such a cartel constitute a Nash
equilibrium? Explain carefully (hint: try to figure out if there is
a profitable deviation for one of the firms while the other sticks
to the cartel agreement).
1. In the commercial aircraft business, Boeing...
Suppose that the firms in the Cournot oligopoly decide to collude. The corresponding demand curve for...
Suppose that the firms in the Cournot oligopoly decide to collude. The corresponding demand curve for the monopolist is given by P= 100-20 where MR = 100-4Q; MC = 4, TC = 4Q Solve for the cartel (total) output, price, and profit. O Q* = 42; p* = 25; Profit = 1152 O Q* = 4; p* = 92; Profit = 352 O Q* = 48; P* = 24; Profit = 1152 O Q* = 24; p* = 52; Profit...
Problem 1 Consider the following Cournot's duopoly, where two identical firms compete by setting quantities. Suppose...
Problem 1 Consider the following Cournot's duopoly, where two identical firms compete by setting quantities. Suppose the Market demand is P = 80 - 2Q and firm's cost function is TC = 20qi, where i = 1,2 (a) Determine each firm's equilibrium quantity, profit and the market equilibrium price. Explain (b) Suppose firms decide to form a cartel. In the static (one-period) case, will they be able to sustain the cartel? Explain using the appropriate pay-off matrix (c) How will...
Cournot Oligopoly and Number of Firms In a Cournot oligopoly, each firm assumes that its rivals...
Cournot Oligopoly and Number of Firms In a Cournot oligopoly, each firm assumes that its rivals do not change their output based on the output that it produces. Ilustration: A Cournot oligopoly has two firms, YandZ. Yobservesthe market demand curve and the number of units that Z produces. It assumes that Z does notchange its output regardless of the number of units that it (Y) produces, so chooses a production level that maximizes its profits. The general effects of a...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each fir...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
Suppose the two firms form a cartel designed to generate monopoly level profits. Explain intuitiv...
Suppose the two firms form a cartel designed to generate
monopoly level profits. Explain intuitively why we might expect the
cartel to fail. Sentence form
47) Firms in an oligopoly i. are independent of each other's actions. ii. can each influence...
47) Firms in an oligopoly i. are independent of each other's actions. ii. can each influence the market price. ii. charge a price equal to marginal revenue. A) 1 only B) ii only C) ii only D) i and ii E) i, ii, and ii 48) Which of the following are characteristics of an oligopoly? i) The HHI for an oligopoly is between 100 and 1800. i) There are a few firms that compete. ii) The firms can increase their...
An oligopoly can be similar to a competitive market. Explain two ways they are similar and...
An oligopoly can be similar to a competitive market. Explain two ways they are similar and two ways they are different? A firm that is in an oligopoly market will try to attain the benefits (for them) of acting like a monopoly by colluding with the other firms in the market and forming a cartel. However, these can break down to the point where the market is more similar to a competitive market. Explain why these agreements often break apart...
Suppose there are now only two firms in the market, Raleigh and Dawes. The inverse market...
Suppose there are now only two firms in the market, Raleigh and Dawes. The inverse market demand curve for bikes is given by P(Y)=200-2Y. Both firms have the same total cost function as follow: TC(Y)=12Y+6. Suppose this market is a Stackelberg oligopoly and Raleigh is the first mover. Find how much does each firm produce, what is the price on the market and how much profit does each firm earn. Dawes offers to Raleigh to collude and to agree on...
Question 11 Which market structure has a few interdependent sellers? monopolistic competition monopoly perfect competition oligopoly...
Question 11 Which market structure has a few interdependent sellers? monopolistic competition monopoly perfect competition oligopoly Question 12 Which of the following is legal? collusion none of the above price leader cartel Question 13 When a dominant firm sets the price and others follow, what is that called? price leader crowding out cartel collusion Question 14 Which theory answers the question "How would my competitor respond if I did this?" crowding out price leadership Game Theory collusion Question 15 Which...
Suppose that Airbus and Boeing decide to form a cartel. Is it
likely that they both stick to an agreement where each of them
produces equal quantities in order to maximize total revenue? In
other words, does a formation of such a cartel constitute a Nash
equilibrium? Explain carefully (hint: try to figure out if there is
a profitable deviation for one of the firms while the other sticks
to the cartel agreement).
1. In the commercial aircraft business, Boeing...
Suppose that the firms in the Cournot oligopoly decide to collude. The corresponding demand curve for the monopolist is given by P= 100-20 where MR = 100-4Q; MC = 4, TC = 4Q Solve for the cartel (total) output, price, and profit. O Q* = 42; p* = 25; Profit = 1152 O Q* = 4; p* = 92; Profit = 352 O Q* = 48; P* = 24; Profit = 1152 O Q* = 24; p* = 52; Profit...
Problem 1 Consider the following Cournot's duopoly, where two identical firms compete by setting quantities. Suppose the Market demand is P = 80 - 2Q and firm's cost function is TC = 20qi, where i = 1,2 (a) Determine each firm's equilibrium quantity, profit and the market equilibrium price. Explain (b) Suppose firms decide to form a cartel. In the static (one-period) case, will they be able to sustain the cartel? Explain using the appropriate pay-off matrix (c) How will...
Cournot Oligopoly and Number of Firms In a Cournot oligopoly, each firm assumes that its rivals do not change their output based on the output that it produces. Ilustration: A Cournot oligopoly has two firms, YandZ. Yobservesthe market demand curve and the number of units that Z produces. It assumes that Z does notchange its output regardless of the number of units that it (Y) produces, so chooses a production level that maximizes its profits. The general effects of a...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
Suppose the two firms form a cartel designed to generate
monopoly level profits. Explain intuitively why we might expect the
cartel to fail. Sentence form
47) Firms in an oligopoly i. are independent of each other's actions. ii. can each influence the market price. ii. charge a price equal to marginal revenue. A) 1 only B) ii only C) ii only D) i and ii E) i, ii, and ii 48) Which of the following are characteristics of an oligopoly? i) The HHI for an oligopoly is between 100 and 1800. i) There are a few firms that compete. ii) The firms can increase their...
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