Homework Answers
Question: Most firms in the business world set their prices using:
Answer: cost-oriented price setting
Reason: In the business world no firm can make a profit until it covers its costs. For pricing, a product cost is an important factor as it allows the firm to charge the optimum price for the goods through analysis of production costs. These days, to make a profit price must be more than the related costs.
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QUESTION 38 Most firms in the business world set their prices using: federal price guidelines. demand-oriented...
18. In a perfectly competitive market, individual firms set: A) prices and quantities B) neither prices...
18. In a perfectly competitive market, individual firms set: A) prices and quantities B) neither prices nor quantities. C) quantiies but not prices D) prices but not quantities 19. The perfectly competitive firm faces a perfectly elastic demand curve because A) t has the ability to set the price and force everyone to buy at that price. it has no ability to control price. B) C) t doesn't; it faces a perfectly inelastic demand curve D) it doesn't; everyone knows...
(6 points) Consider a market with two identical firms. The market demand curve is: P-140 10Q...
(6 points) Consider a market with two identical firms. The market demand curve is: P-140 10Q And the marginal cost and average cost of each firm is constant: AC-MC-10 6. (3 points) Consider a world in which collusion is legal a. i. At what price will these firms maximize their combined profits? ii. What is the quantity produced at which they maximize their profits? b. (3 points) Suppose collusion is illegal. Firm 1 decides that they will send a signal...
Q4. There are two firms A and B in a homogenous product industry. Inverse demand is...
Q4. There are two firms A and B in a homogenous product industry. Inverse demand is P = 120 Q where Q is the combined output of the firms. Firm A has a marginal cost of 0 and firm B has a marginal cost of 10. There is an infinite sequence of periods in which firms simultaneously set prices. In this question we will consider whether the following collusive strategies with trigger strategy punish- ments are a subgame perfect Nash...
Question 38 1.66 pts Holding all else constant, an increase in the market demand for a...
Question 38 1.66 pts Holding all else constant, an increase in the market demand for a product in a competitive market would cause a decrease in profits for a firm. the average total cost (ATC) curve of the firms to increase. the marginal revenue (MR) curve of the firms to increase. a decrease in the price a firm could charge for the product. the marginal cost (MC) curve of the firms to increase.
Consider two firms competing in a market with a demand function P=150-Q. Both firms have constant...
Consider two firms competing in a market with a demand function P=150-Q. Both firms have constant marginal cost c>0. There are no fixed costs. They compete by setting prices p₁ and p₂ simultaneously. (Bertrand game.) Which of the following statements is not correct? Select one: a. Both firms charging charging p = c is a Nash equilibrium. b. When firm 1 sets where is the industry monopoly price, firm 2's best response is to set . c. When p₁=c, any price p₂≥c...
36) When a monopolist sells the same product at different prices and the prices are not related to cost differences, we have B) price differentiation. D) monopoly pricing A) price discrimination...
36) When a monopolist sells the same product at different prices and the prices are not related to cost differences, we have B) price differentiation. D) monopoly pricing A) price discrimination C) marginal cost pricing. 37) 37) Monopolies misallocate resources because A) price does not equal marginal cost B) profits are usually positive. C) marginal cost does not equal average total cost. D) price does not equal average total cost. 38) 38) Which of the following assumptions is true about...
Box 1 Options: (Price takers) (Monopolistically Competitive firms) (price makers) Box 2 Options: (Supply) (Demand) (Aver...
Box 1 Options: (Price takers)
(Monopolistically Competitive firms) (price makers)
Box 2 Options: (Supply) (Demand) (Average total cost)
Consider Kellogg's production and price choices in the breakfast cereal industry when it is characterized by the price leadership model price makers Therefore, the horizontal Under this theory of oligopoly, all firms other than the dominant firm act as sum of their marginal cost curves is their curve The following graph shows the market demand curve and the horizontal sum of the...
Problem 4. Bertrand Competition with Different Costs Suppose two firms facing a demand D(p) compete by setting prices s...
Problem 4. Bertrand Competition with Different Costs Suppose two firms facing a demand D(p) compete by setting prices simultaneously (Bertrand Competition). Firm 1 has a constant marginal cost ci and Firm 2 has a marginal cost c2. Assume ci < C2, i.e., Firm 1 is more efficient. Show that (unlike the case with identical costs) p1 = (1 and p2 = c2 is not a Bertrand equilibrium.
Answer the next question based on the following demand and supply model for a business firm...
Answer the next question based on the following demand
and supply model for a business firm producing motorcycles. Assume
that 300 motorcycles is the optimal and most profitable level of
production for the firm. All dollars are in thousands.
(a) What are the equilibrium price and quantity at the
medium level of demand (DM)?
(b) What will be the equilibrium price and quantity if
there is a demand shock that unexpectedly lowers demand
(DL)?
(c) What will be the equilibrium...
Question 2 6 pts There are 3 firms setting quantities simultaneously. The inverse demand is p=a-...
Question 2 6 pts There are 3 firms setting quantities simultaneously. The inverse demand is p=a- bQ, where Q is the total quantity. The marginal cost of two firms is 1 and the marginal cost of the remaining firm is 2. What is the NE in quantities? You need to at least show the profit function of each type of firm and the first-order conditions.
18. In a perfectly competitive market, individual firms set: A) prices and quantities B) neither prices nor quantities. C) quantiies but not prices D) prices but not quantities 19. The perfectly competitive firm faces a perfectly elastic demand curve because A) t has the ability to set the price and force everyone to buy at that price. it has no ability to control price. B) C) t doesn't; it faces a perfectly inelastic demand curve D) it doesn't; everyone knows...
(6 points) Consider a market with two identical firms. The market demand curve is: P-140 10Q And the marginal cost and average cost of each firm is constant: AC-MC-10 6. (3 points) Consider a world in which collusion is legal a. i. At what price will these firms maximize their combined profits? ii. What is the quantity produced at which they maximize their profits? b. (3 points) Suppose collusion is illegal. Firm 1 decides that they will send a signal...
Q4. There are two firms A and B in a homogenous product industry. Inverse demand is P = 120 Q where Q is the combined output of the firms. Firm A has a marginal cost of 0 and firm B has a marginal cost of 10. There is an infinite sequence of periods in which firms simultaneously set prices. In this question we will consider whether the following collusive strategies with trigger strategy punish- ments are a subgame perfect Nash...
Question 38 1.66 pts Holding all else constant, an increase in the market demand for a product in a competitive market would cause a decrease in profits for a firm. the average total cost (ATC) curve of the firms to increase. the marginal revenue (MR) curve of the firms to increase. a decrease in the price a firm could charge for the product. the marginal cost (MC) curve of the firms to increase.
36) When a monopolist sells the same product at different prices and the prices are not related to cost differences, we have B) price differentiation. D) monopoly pricing A) price discrimination C) marginal cost pricing. 37) 37) Monopolies misallocate resources because A) price does not equal marginal cost B) profits are usually positive. C) marginal cost does not equal average total cost. D) price does not equal average total cost. 38) 38) Which of the following assumptions is true about...
Box 1 Options: (Price takers)
(Monopolistically Competitive firms) (price makers)
Box 2 Options: (Supply) (Demand) (Average total cost)
Consider Kellogg's production and price choices in the breakfast cereal industry when it is characterized by the price leadership model price makers Therefore, the horizontal Under this theory of oligopoly, all firms other than the dominant firm act as sum of their marginal cost curves is their curve The following graph shows the market demand curve and the horizontal sum of the...
Problem 4. Bertrand Competition with Different Costs Suppose two firms facing a demand D(p) compete by setting prices simultaneously (Bertrand Competition). Firm 1 has a constant marginal cost ci and Firm 2 has a marginal cost c2. Assume ci < C2, i.e., Firm 1 is more efficient. Show that (unlike the case with identical costs) p1 = (1 and p2 = c2 is not a Bertrand equilibrium.
Answer the next question based on the following demand
and supply model for a business firm producing motorcycles. Assume
that 300 motorcycles is the optimal and most profitable level of
production for the firm. All dollars are in thousands.
(a) What are the equilibrium price and quantity at the
medium level of demand (DM)?
(b) What will be the equilibrium price and quantity if
there is a demand shock that unexpectedly lowers demand
(DL)?
(c) What will be the equilibrium...
Question 2 6 pts There are 3 firms setting quantities simultaneously. The inverse demand is p=a- bQ, where Q is the total quantity. The marginal cost of two firms is 1 and the marginal cost of the remaining firm is 2. What is the NE in quantities? You need to at least show the profit function of each type of firm and the first-order conditions.
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