1. The following graph depicts the demand curve, marginal revenue curve, and marginal cost curve that an oligopolist faces. The firm is currently charging the cartel price, P*, and producing the cartel quantity, Q*.
Suppose input prices fall and marginal cost decreases
from MC1 to MC2. Based on this event alone, the firm depicted in
the figure above will
2. Suppose one rental car company raises its prices and the rival car companies leave their prices unchanged. But when another rental car company lowers its prices, the other companies match the price decrease. This situation is an example of....
•Incorrect answer for Part 1 (a) was price leadership.
Drop down options for Part 1 (a) that I haven't tried: Tit for tat, the kinked demand curve, collusion.
•Incorrect answer for Part 2 (b) was the market in rental cars is a competitive market.
Drop down options for Part 2 (b) that I haven't tired: The market in rental cars is an oligopoly, Avis is larger than both it's rivals.
Homework Answers
Part a) Since both the marginal cost curves MC1 and MC2 intersect the marginal revenue curve on the section where the marginal revenue curve is vertical, so the decrease in marginal cost from MC1 to MC2will not cause any change in the price.
Part b) One rental car company raises its prices and the rival car companies leave their prices unchanged. But when another rental car company lowers its prices, the other companies match the price decrease. This situation is an example of Tit for tat.
Part c) If the “one rental company” is Avis, then the market in rental cars is an oligopoly.
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1. The following graph depicts the demand curve,
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9. Understanding the kinked demand curve theory Aa A Happyland is one of five amusement parks...
9. Understanding the kinked demand curve theory Aa A Happyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (DID2) and the resulting marginal revenue curve (MRIMR2). The graph also shows two possible marginal cost curves (MC1 and MC2) PRICE AND COSTS (Dollars per ticket 48 D1 40 MRT 32 MCI 16 : MC2 MR2 0412 16 20 4 QUANTITY IMittions of tickets per yearl Assume Happyland's marginal cost is represented by...
Question 22 On the chart below the environment case for the Jones company can be observed....
Question 22 On the chart below the environment case for the Jones company can be observed. The dotted line demonstrates a broad gap between investment (M) in reducing pollution and the benefit gained (MB) by the investment. What scenario does this illustrate, as it relates to the marginal cost of reducing pollution? MC MB Environmental Protection Extensive Pollution Select the correct answer below: A broad separation between marginal cost and marginal benefit curves indicates that there are ways to reduce...
33. Gas’n'Go is one of the 20 gas stations in Lafayette, California. The following diagram shows the demand curve (D), marginal revenue curve (MR), marginal cost curve (MC) and average total cost...
33. Gas’n'Go is one of the 20 gas stations in Lafayette,
California. The following diagram shows the demand curve (D),
marginal revenue curve (MR), marginal cost curve (MC) and average
total cost curve (ATC) for GasN'Go. Assume that the market for
gasoline is a monopolistically competitive market.
Part 1: Label all curves and identify and label the initial price
(P1) and quantity (Q1).
Part 2: Suppose that the price of oil increases, causing Gas'n'Go's
production costs to also increase (oil...
A duopoly faces a market demand of p 180-Q. Firm 1 has a constant marginal cost...
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2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool...
Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve.
3. Is monopolistic competition efficient? Suppose that a firm produces baseball bats in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.On the graph input tool, change the...
9. Understanding the kinked demand curve theory Aa A Happyland is one of five amusement parks on Sunshine Island. The following graph shows Happyland's kinked demand curve (DID2) and the resulting marginal revenue curve (MRIMR2). The graph also shows two possible marginal cost curves (MC1 and MC2) PRICE AND COSTS (Dollars per ticket 48 D1 40 MRT 32 MCI 16 : MC2 MR2 0412 16 20 4 QUANTITY IMittions of tickets per yearl Assume Happyland's marginal cost is represented by...
Question 22 On the chart below the environment case for the Jones company can be observed. The dotted line demonstrates a broad gap between investment (M) in reducing pollution and the benefit gained (MB) by the investment. What scenario does this illustrate, as it relates to the marginal cost of reducing pollution? MC MB Environmental Protection Extensive Pollution Select the correct answer below: A broad separation between marginal cost and marginal benefit curves indicates that there are ways to reduce...
33. Gas’n'Go is one of the 20 gas stations in Lafayette,
California. The following diagram shows the demand curve (D),
marginal revenue curve (MR), marginal cost curve (MC) and average
total cost curve (ATC) for GasN'Go. Assume that the market for
gasoline is a monopolistically competitive market.
Part 1: Label all curves and identify and label the initial price
(P1) and quantity (Q1).
Part 2: Suppose that the price of oil increases, causing Gas'n'Go's
production costs to also increase (oil...
A duopoly faces a market demand of p 180-Q. Firm 1 has a constant marginal cost of Mc1 -S20. Firm 2s constant marginal cost is MC2 $40. Calculate the output of each firm, market output, and price if there is (a) a collusive equilibrium or (b) a Cournot equilibrium The collusive equilibrium occurs where q, equals and q2 equals (Enter numeric responses using real numbers rounded to two decimal places) Market output is The collusive equilibrium price is S The...
The graph to the right depicts the average cost curves and the marginal cost curve for a typical firm in a competitive industry. 1.) Using the line drawing fool, draw the firm's demand curve at a market price such that the firm is breaking even. Label your curved, 2.) Using the line drawing tool, draw the firm's demand curve at a market price such that the firm is at its shutdown price. Label your curved, Carefully follow the instructions above,...
3. A market consists of 100 identical firms and the market demand curve is given by D(P) = 60 - P. Each firm has a short-run total cost curve STC(q)-0.1+150q2. What is the short-run equilibrium price and quantity in this market? 4. The short-run marginal cost curves of two types of firms in an industry are given as MC1 = 3q and MC2 = 5q respectively. There are 100 firms of each type. If these firms behave competitively, determine the...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool...
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool...
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