inated by Apple, but recently the Droid has been able to leverage Google's information services into market gains, while Blackberry, known for its secure business-oriented network, has attempted to become more attractive with a “friendlier” interface. At t

inated by Apple, but recently the Droid has been able to leverage Google's information services into market gains, while Blackberry, known for its secure business-oriented network, has attempted to become more attractive with a “friendlier” interface. At t

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

See similar textbooks

Similar questions

Monopoly outcome versus perfectly competitive outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run perfectly competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Use the green point (triangle symbol) to shade the area that represents consumers’ surplus, and use the purple point (diamond symbol) to shade the area that represents producers’ surplus. (graph 1) Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and…
Monopoly and Price Elasticity Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, quantity would fall by a (LARGER AND SMALLER) percentage than the rise in price, causing profit to (DECREASE OR INCREASE) . Therefore, a monopolist will (ALWAYS, NEVER OR SOMETIMES) produce a quantity at which the demand curve is elastic. Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal-revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR).
Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, total revenue would (DECREASE OR INCREASE) and total cost would(DECREASE OR INCREASE) . Therefore, a monopolist will (SOMETIMES, ALWAYS, NEVER) produce a quantity at which the demand curve is inelastic. Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal-revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR).
Intel is the world’s largest manufacture of semiconductor chips by revenue. During the 1990s, Intel became the dominant supplier of microprocessors for PCs and was known for aggressive and anti-competitive tactics in defense of its market position. Consider the market for Intel’s Pentium II processor, released in May 1997. Assume Pentium II enjoyed a monopoly in computer processors. Intel’s cost of production is characterized by function C = 10Q2, marginal cost MC = 20Q, while the market demand for the product is P = 400 − 10Q. Calculate Intel’s profit-maximizing quantity for its Pentium II processor. How much would Intel price its Pentium IIs?
Q1 In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. Monopoly is one of the market structures in Malaysia. It is characterized by the ability of one seller to gain high profits. In a place where a monopoly operates, it is hard for other firms to start. An example of monopolies Malaysia GLCS are Telekom Malaysia, TNB and etc. (In some cases, these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). (a) Explain TWO (2) advantages and disadvantages of such an approach above to ensure that the "best interest of society" is promoted in these monopoly markets. (b) Economists however would prefer a private ownership of monopoly rather than a public ownership of monopoly.
Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. Use the green points (triangle symbol) to shade the area that represents consumer surplus, and use the purple points (diamond symbol) to shade the area that represents producer surplus. PRICE (Dollars per hot dog) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 30 Monopoly MC D MR 90 120 150 180 210 240 270 300 QUANTITY (Hot dogs)…
5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 5.0 4.5 PC Outcome 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 PRICE (Dollars per hot dog) 0 30 60 S=MC 90 120 150 180 210 QUANTITY (Hot dogs) D 240 270 300
Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and marginal cost (Mc) curves for the monopoly firm. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. Monopoly 5.0 4.5 Monopoly Outcome 4.0 3.5 3.0 2.5 MC 2.0 1.5 1.0 0.5 D MR 35 70 105 140 175 210 245 280 315 350 QUANTITY (Hot dogs) In the following table, enter the price and quantity that would arise in a perfectly competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist…
Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. Competitive Market 5.0 4.5 PC Outcome 4.0 3.5 3.0 o 2.5 2.0 S=MC 1.5 1.0 0.5 D 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hot dogs) PRICE (Dollars per hot dog)
It is illegal for any two firms that sell similar products to engage in price-fixing agreements. Violating the anti-trust laws can bring both civil and criminal prosecutions. Nevertheless, price-fixing does take place. Examples would be found at the service plazas along the NY State Thruway and the NJ Turnpike. Each location has a small number of fast-food restaurants. Each fast food restaurant belongs to a different firm, which should create competition, yet at service plazas, all have uncommonly high prices. Draw a prisoner’s dilemma type of game (2x2) to show the pricing choices and strategies of two competing fast-food restaurants, located at one service plaza. Payoffs are daily profits. Create sensible numbers. Write a brief explanation for the different numbers that you have created. Identify John Nash’s equilibrium, as well as the optimal outcome for the two fast-food outlets. Also, find and label any strictly dominant strategies. Actual long-run pricing results at…
Sources of monopoly power A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry—that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Scenario Barriers to Entry Exclusive Ownership of a Key Resource Government-Created Monopolies Economies of Scale The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the U.S. aluminum industry from the late 19th century until the 1940s. In the public water industry, low average total costs are obtained only…
Economist Harvey Leibenstein argued that the loss economic efficiency in industries that are not perfectly competitive has been understated. He argues that when competition is weak, firms are under less pressure to adopt the best techniques or to hold down their costs. He refers to this effect as "x-inefficiency." If x-inefficiency causes a firm's marginal costs to rise, how is the deadweight loss caused by a monopoly understated? Suppose MC₁ is the marginal cost of production with perfect competition and MC₂ is the marginal cost of production with x-inefficiency. Use the triangle drawing tool to shade in the deadweight loss with x-inefficiency. Label this shaded area 'Deadweight loss₂'. Carefully follow the instructions above, and only draw the required objects. Price and cost PMP Pot MCM Deadweight loss ….….…………………. QM MER MC₂ Qc Quantity MC₁ Demand