Refer to Table 6-1 in Question 21. If both stores follow a dominant strategy annual profit will grow by.. O $1.5 million for HomeMax and by $1.0 million for Lopes. O $3.4 million for HomeMax and by $0.4 million for Lopes. O $0.6 million for HomeMax and by $3.2 million for Lopes. O $2.5 million for HomeMax and by $2.0 million for Lopes.
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- Quantity Demanded Marginal Revenue Product Price Total Revenue $2 2 1 2 2 2 3 2 4 2 a. What can you conclude about the structure of the industry in which this firm is operating? O The industry is purely oligopolistic. O The industry is purely competitive. O The industry is purely monopolistic. O The industry is monopolistically competitive. b. Graph this firm's TR and MR curves. Instructions: (1) On the figure on the left, use the tool provided 'TR' to plot the total-revenue curve (plot 6 points total for q= 0, 1, 2, 3, 4, and 5). (2) On the figure on the right, use the tool provided 'MR' to plot the marginal-revenue curve (plot 6 points total for q = 0, 1, 2, 3, 4, and 5). Total Revenue Marginal Revenue 11 Tools 11 Tools 10 10 9. 9. TR MR 7 7 6. 6 4 4 3 2 2 1 1 1 4 6. 1 3 4 6. Quantity Quantity Price Price$2.50 $2.25 MC ATC $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 --- $0.50 Demand P $0.25 MR $0.00 10 15 20 25 30 Output (Q) The firm shown in the diagram above is in long run equilibrium in a monopolistically competitive market. According to the graph, Excess Capacity is Output. units of Select one: O a. 15 O b. 20 O C. 5 O d. 10Ma3. You operate in a duopoly in which you and a rival must simultaneously decide what price to charge for the same homogeneous product. Assume each you and your rival can choose a “low price” or a “high price”. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3 million. If you charge different prices, the one charging the high price loses $5 million and the one charging the low price makes $5 million. What is the Nash equilibrium for the non-repeated version of this game? Now suppose the game is infinitely repeated. If the interest rate is 10%, can you do better than you could in the non-repeated version of this game? If your answer is “yes”, provide the players’ strategies and any other conditions that must hold.
- The graph below shows a demand curve for a firm operating in an oligopolistic market. Kinked Demand Price 100 90 80 70 60 50 40 30 20 10 0 MR Quantity D 10 20 30 40 50 60 70 80 90 100 MC O relatively more elastic. O relatively more inelastic. O perfectly elastic. O perfectly inelastic. Compared to a price of $75, at a price of $60 demand is ORefer to the graph shown. The equilibrium quantity for the monopolistically competitive firm represented is: Price $10 $9 $8 A A A A A A ASS $7 $6 $5 $4 $3 $2 $1 $0 O O O 30. 60. 70. MR I AL 0 10 20 30 40 50 60 70 80 90 100 Quantity 50. MC ATC Destion 8 of 16 Consider the demand and cost curves for Old Balance running Price per pair Average total cost shoes, a monopolistically competitive firm. Assume that the market for running shoes is in long-run equilibrium and $200 190 answer the questions. 180 170 Marginal cost Calculate Old Balance's markup. 160 150 140 130 120 110 100 90 80 70 Marginal revenue 60 Calculate Old Balance's excess capacity. 50 Demand 40 30 20 10 excess capacity: pairs of shoes 1 2 3 4 5 6 7 8 9 10 Pairs of shoes (thousands)
- QUESTION 26 Price MC 160 140 ATC 123.33 Demand 90 56.67 MR 100 133.33 154.92 Quantity The figure is drawn for a monopolistically-competitive firm. In response to the situation in this graph, we would expect O a. many new firms to enter this market O b. this firm to gain positive profit in the long run O c. this firm's profit to move from its current value toward zero in the long run O d. All of the above are correctThe graph below shows a demand curve for a firm operating in an oligopolistic market. Kinked Demand Price 100 90 80 70 MC 60 50 40 30 20 10 MR D 10 20 30 40 60 70 80 90 100 Quantity Compared to a price of $75, at a price of $60 demand is O relatively more elastic. O relatively more inelastic. O perfectly elastic. O perfectly inelastic.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 that cost. PRICE (Dolars per kit) 100 8 80 70 50 8 10 0 MO 10 ATC 20 30 O True O False MR 60 70 QUANTITY (Thousands of kits) Demand 40 80 90 100 Mon Comp Outcome Min Unit Cost Because this market is monopolistically competitive, you can tell that it is in long-run equilibrium by the fact that firm. Further, a monopolistically competitive firm's average total cost in long-run equilibrium is True or False: This indicates that there is excess capacity in the market for kits. at the optimal quantity for each the minimum average total cost.
- Bob competes in a monopolistically competitive market. Suppose some new firms enter the market, causing his perceived demand curve to shift. The following tables show Original Demand Curve his demand curves, before and after the change, and his cost information. Price Quantity TC Assume that Bob can only choose from the quantities of output given in the table. By how much will his profit change after these new firms enter the market? $33 $20,000 $32 1,000 $30,000 $31 2,000 $45,000 $30 3,000 $70,000 $29 4,000 $100,000 New Demand Curve Price Quantity TC $30 $20,000 $29 1,000 $30,000 $28 2,000 $45,000 $27 3,000 $70,000 $26 4,000 $100,000 O his profits will not change O decrease by $9,000 O increase by $11,000 O decrease by $11,000The most important factor that drives the long-run profit to zero in monopolistic competition is the elasticity of the market demand curve the elasticity of the firm's demand curve free entry and exit O the reaction of rival firms to a change in price What is one difference between the Cournot and Stackelberg models? O In Cournot, both firms make price decisions simultaneously, and in Stackelberg, one firm sets its price level first O In Stackelberg, both firms make price decisions simultaneously, and in Cournot, one firm sets its price level first O In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first O In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first O Profits are zero in Cournot and positive in StackelbergS Profit Maximization Suppose that a monopolistically competitive restaurant is currently serving 260 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. Instructions: Enter your answers as a whole number. a. What is this firm's profit or loss? $ 520 b. Will there be entry or exit? Entry Will this restaurant's demand curve shift left or right? Left In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Suppose that the allocatively efficient output level in long-run equilibrium is 210 meals. c. What is the size of the firm's economic profit? $ 460 d. Is the deadweight loss for this firm greater than or less than $90? Less than