If a firm is making negative economic profit in a perfectly competitive output market (as described in chapter 8), this means the average total cost at profit maximizing output is the market price. In the long-run, firms will * the industry until the price is • to the minimum average total cost.
If a firm is making negative economic profit in a perfectly competitive output market (as described in chapter 8), this means the average total cost at profit maximizing output is the market price. In the long-run, firms will * the industry until the price is • to the minimum average total cost.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.2P
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Transcribed Image Text:If a firm is making negative economic profit in a perfectly competitive output market (as described in chapter 8), this means the average total cost at profit maximizing output is
• the market price. In the long-run,
firms will
• the industry until the price is
* to the minimum average total cost.
Given that a firm in a perfectly competitive output market and Monopolist have the same, horizontal marginal cost curve, and both markets have the same demand curve, the Monopolist will charge a
+ price than that
in the perfectly competitive output market and produce
• market output than in a perfectly competitive output market. Further, the consumer surplus is
• in a perfectly competitive output market than for
a Monopolist market.
Say two firms competing in Cournot competition have the same marginal cost and firm 1's reaction curve is Q = 50 – .502, where Q, is firm 1's output and Q, is firm 2's output. Which of the following is the Nash
equilibrium output for firm 1 (to two decimal places)?
Oa.
25.00
O b. 66.66
O c. 75.00
O d.
33.33
Which of the following explains why a cartel/collusion among firms in Oligopoly is usually not tenable?
O a.
One firm has an incentive to produce more than the agreed output to increase its own profits.
Ob. One firm has an incentive to produce less than the agreed output to increase its own profits.
O c. One firm has an incentive to lower the price it charges by decreasing its own output.
O d. One firm has an incentive to lower the price it charges without changing its own output.
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