Ans B: Equating Marginal revenue (MR) and Marginal Cost (MC)
This is the profit maximization condition for an oligopoly.
Ans C: Reduce or restrict output,
Maximize joint profits, or sales
Profits.
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b. An oligopolistic firm maximizes profit by equating and c. The firms in an oligopoly have...
c. The firms in an oligopoly have a collective incentive to output in order to maximize joint individually, each firm has an incentive to output in order to maximire Individual d. Oligopolistic firms earn profits in the long run only if there are significant barriers to entry economies of scale
Two firms A and B control the market for mouth guards and face a market demand curve for mouth guards given by Q = 320 − 4P where Q is the total sales of mouth guards. The short-run cost curves of the two firms are given by SRTCA = 2090 + (q2A)/4 SRTCB = 1045 + (q2B)/2 a) If the two firms agree to collude in order to maximize their joint profits, what will be output of each firm and...
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...
2. (15 points). The demand function for an oligopolistic market is given by the equation, Q 180-4P, where Q is quantity demanded and P is price. The industry has one dominant firm whose marginal cost function is: MC 12+1Qp, and many small firms, with a total supply function: Qs 20+ P. (a) Derive the demand equation for the dominant oligopoly firm. (b) Determine the dominant oligopoly firm's profit-maximizing out- put and price. (c) Determine the total output of the small...
Three firms have identical revenue and profit functions. Firm 1 is a private sector firm operated by an owner-manager who wishes to maximize profit. Firm 2 is managed by an revenue-maximizing manager whose pay is proportional to the firm's revenue. Firm 3 is a government-owned firm that has been instructed to maximize the amount of employment, L, subject to the constraint that revenue must not be negative. Each of the three firms has a revenue function R(q)=140−2q^2 and a cost...
13. In a Bertrand oligopoly a) each firm chooses simultaneously and non-cooperatively how much to b) each firm chooses simultaneously and non-cooperatively its own product's c) one firm acts as a quantity leader, choosing its quantity first, while all other d) each firm makes its profit-maximizing decision while considering the entire produce to maximize its own profit. price to maximize its own profit. firms act as followers, choosing their quantities second and in reaction to the leader. market demand, the...
In a perfectly competitive market, a firm profit maximizes by choosing to produce the level of output for which a. marginal revenue equals marginal cost. b. total revenue equals marginal costs. c. externalities are minimized. d. net social benefits are greatest. e. marginal costs are minimized. . if economic profits are positive for firms in a perfectly competitive market, then a. market supply will shift to the left. b. each firm will decrease production. c. new firms will enter the...
Two large diversified consumer products firms (Firm A and Firm B) are about to enter the market for a new pain reliever. The two firms are very similar in terms of their costs, strategic approach, and market outlook. The market demand curve for the pain reliever is given as: P = 2 – 0.000625Q where Q = QA + QB Both firms have the same constant marginal costs of production MCA = MCB = $0.50 per bottle; and fixed costs...
2. Suppos e there are two firms in an oligopoly, Firm A both firms charge a low price, each earns and Firm B. If $2 million in profit. If both firms charge a high price, each earns $3 million in profit. If one firm charges a high price and one charges a low price, customers flock to the firm with the low price, and that firm earns $4 million in profit while the firm with the high price earns $1...
6. There are 2 firms in an oligopoly market: firm ABC and firm XYZ. They simultaneously decide whether to spend on advertising. If both firms spend on advertising, the profit of each will be $80. If both firms do not spend on advertising, the profit of each will be $100. If only one firm spends on advertising, the firm with advertising carns $150 and the firm without advertising carns $30. (a) Complete the payoff matrix below. Advertising Advertising ABC: XYZ:...