Homework Answers
1) Solution: consumer surplus increases, the integrating firms are monopolists
Explanation: When two firms consider vertical integration, it will increase the consumer surplus and profits because the firms have a certain degree of power in market, so they price above marginal cost
2) Solution: Competing firms properly interpret each others pricing signals
Explanation: The predatory pricing will be successful when company fixing the predatory prices has greater financial resources; however it will be more costly for the company
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LE WHERIA Map RUYUCU PERE, firms at 6 and 2 (4 points) 4. When two firms...
Problem 5. (20 points) There are two competing firms. Each firm decides when to exit the...
Problem 5. (20 points) There are two competing firms. Each firm decides when to exit the market: (i) immediately, (ii) after 6 months, or (iii) after 1 year. If a firm decides to exit the market, it does not get any payoff from that point on (that is, its utility stays the same). After every 6 months firms gain or lose utilities as follow: if both firms are still in the market, they both lose -1 and if only one...
are making an economic Today, firms in a perfectly competitive market run, firms will profit. In...
are making an economic Today, firms in a perfectly competitive market run, firms will profit. In the long firns in a perfectly competitive market are making the market until all firms in the market onomic e) exit, producing at the minimum point on their long-run average cost d) a) exit; covering only their total fixed costs b) enter, making zero economic profit enter, making zero normal profit an economic profit when new firms enter 46. The firms in a perfectly...
Part B: Problem Set - Vertical FDI (65 points total): Consider two firms. The first firm...
Part B: Problem Set - Vertical FDI (65 points total): Consider two firms. The first firm is based in Slovenia and produces ball bearings (upstream firm). The cost of producing ball bearings is 6 per unit. The second firm is based in Greece. This firm produces machines (downstream firm). To produce one machine, the Greek firm must buy 2 ball bearings (ignore shipping costs between Slovenia and Greece). In addition, for each machine it makes it has a production cost...
5 Android Phones - 2 points Suppose the market for Android smart phones is perfectly competitive. All firms are identic...
5 Android Phones - 2 points Suppose the market for Android smart phones is perfectly competitive. All firms are identical with the same cost functions: TC = 9° +800+100, MC = 2q + 80, (q is the quantity produced by a representative firm). The market demand is P = 150 - Q. (Q is market quantity). (a) Given the above information: find the equation for FC, VC, TC, ATC, and AVC. (1/2 point) (b) Determine q, P and the number...
4. (25 points) Suppose there are only two firms producing widgets. The total cost function for ea...
4. (25 points) Suppose there are only two firms producing widgets. The total cost function for each firm is identical and is given by T℃(a = 8h, where gi is the output of firmi A market research company has found that demand for widgets can be described by the inverse demand function P 200 2Q, where Q-q (a) (10 points) A firm's action in the Courot Duopoly game is to choose an output level. Draw each firm's reaction function as...
Q P 0 TR MR MC Profit $5 2 3 4 5 6 $5 $5 $5...
Q P 0 TR MR MC Profit $5 2 3 4 5 6 $5 $5 $5 $5 $5 TC $9 $10 $12 $15 $19 $24 $30 $45 Look at the above table. Based on these numbers, the marginal cost, MC, for producing six units, quantity, Q, level 6, is equal to: $6.00 $3.00 $1.00 $7.00 a company, which is perfectly competitive, will respond to losses by In the short run; reducing production or shutting down In the short run; increasing...
4. Which of the following is NOT a true statement about market conditions for firms under...
4. Which of the following is NOT a true statement about market conditions for firms under perfect competition a. Each firm will produce as efficiently as possible b. Consumer surplus is maximized. c. Economic profits of firms will always be zero in the long run. d. Government intervention must move markets to equilibrium. c. Price - Long-Run Marginal Cost - min Long-Run Average Cost 5. In the market shown on the graph on the right ATC a. Mark profit maximizing...
Question 2 (60 points) Consider two following Cournot competition between two firms, Firm 1 and Firm...
Question 2 (60 points) Consider two following Cournot competition between two firms, Firm 1 and Firm 2. The firms face an inverse demand function P = 600-Q where Q = 91 + 92 is the total output. Each unit produced costs c-$60. Therefore the profit of each farmer is given by π1 (J1.qz) = (600-91-J2)a1-6091 712 (41,42) (600 q1 q2)42-6092 Each firm. i simultaneusly chooses own qi to maximize own profits πί. a) (15 points) Find the Cournot NE quantities...
2. 3. 4. 5. 6. 7. 8. A firm's average fixed cost (AFC) is 10 when...
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A firm's average fixed cost (AFC) is 10 when it produces Q=2. Then at Q=5, AFC is ... ОА. 8 Ов. 2 ос. 20 In a perfectly competitive market, the demand for a single firm's product is always O A. perfectly inelastic. O B. exactly as elastic as the market demand curve. O C. inelastic, but not perfectly inelastic. O D. perfectly elastic. As a firm's output increases: O A. average variable cost...
1.) What is the main difference between a competitive firm and a monopoly? a. A competitive...
1.) What is the main difference between a competitive firm and a monopoly? a. A competitive firm owns a key resource, but a monopoly firm does not. b. A competitive firm is a price taker, and a monopoly is a price maker. c. A competitive firm produces output at a lower cost than a monopoly firm. d. A competitive firm is subject to government regulations, but a monopoly firm is not. 2.) What is the main social problem caused by...
Problem 5. (20 points) There are two competing firms. Each firm decides when to exit the market: (i) immediately, (ii) after 6 months, or (iii) after 1 year. If a firm decides to exit the market, it does not get any payoff from that point on (that is, its utility stays the same). After every 6 months firms gain or lose utilities as follow: if both firms are still in the market, they both lose -1 and if only one...
are making an economic Today, firms in a perfectly competitive market run, firms will profit. In the long firns in a perfectly competitive market are making the market until all firms in the market onomic e) exit, producing at the minimum point on their long-run average cost d) a) exit; covering only their total fixed costs b) enter, making zero economic profit enter, making zero normal profit an economic profit when new firms enter 46. The firms in a perfectly...
Part B: Problem Set - Vertical FDI (65 points total): Consider two firms. The first firm is based in Slovenia and produces ball bearings (upstream firm). The cost of producing ball bearings is 6 per unit. The second firm is based in Greece. This firm produces machines (downstream firm). To produce one machine, the Greek firm must buy 2 ball bearings (ignore shipping costs between Slovenia and Greece). In addition, for each machine it makes it has a production cost...
5 Android Phones - 2 points Suppose the market for Android smart phones is perfectly competitive. All firms are identical with the same cost functions: TC = 9° +800+100, MC = 2q + 80, (q is the quantity produced by a representative firm). The market demand is P = 150 - Q. (Q is market quantity). (a) Given the above information: find the equation for FC, VC, TC, ATC, and AVC. (1/2 point) (b) Determine q, P and the number...
4. (25 points) Suppose there are only two firms producing widgets. The total cost function for each firm is identical and is given by T℃(a = 8h, where gi is the output of firmi A market research company has found that demand for widgets can be described by the inverse demand function P 200 2Q, where Q-q (a) (10 points) A firm's action in the Courot Duopoly game is to choose an output level. Draw each firm's reaction function as...
Q P 0 TR MR MC Profit $5 2 3 4 5 6 $5 $5 $5 $5 $5 TC $9 $10 $12 $15 $19 $24 $30 $45 Look at the above table. Based on these numbers, the marginal cost, MC, for producing six units, quantity, Q, level 6, is equal to: $6.00 $3.00 $1.00 $7.00 a company, which is perfectly competitive, will respond to losses by In the short run; reducing production or shutting down In the short run; increasing...
4. Which of the following is NOT a true statement about market conditions for firms under perfect competition a. Each firm will produce as efficiently as possible b. Consumer surplus is maximized. c. Economic profits of firms will always be zero in the long run. d. Government intervention must move markets to equilibrium. c. Price - Long-Run Marginal Cost - min Long-Run Average Cost 5. In the market shown on the graph on the right ATC a. Mark profit maximizing...
Question 2 (60 points) Consider two following Cournot competition between two firms, Firm 1 and Firm 2. The firms face an inverse demand function P = 600-Q where Q = 91 + 92 is the total output. Each unit produced costs c-$60. Therefore the profit of each farmer is given by π1 (J1.qz) = (600-91-J2)a1-6091 712 (41,42) (600 q1 q2)42-6092 Each firm. i simultaneusly chooses own qi to maximize own profits πί. a) (15 points) Find the Cournot NE quantities...
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A firm's average fixed cost (AFC) is 10 when it produces Q=2. Then at Q=5, AFC is ... ОА. 8 Ов. 2 ос. 20 In a perfectly competitive market, the demand for a single firm's product is always O A. perfectly inelastic. O B. exactly as elastic as the market demand curve. O C. inelastic, but not perfectly inelastic. O D. perfectly elastic. As a firm's output increases: O A. average variable cost...
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