Do not open this exam until told to do so.


 Margery Phillips
 1 years ago
 Views:
Transcription
1 Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Winter 004 Final (Version ): Intermediate Microeconomics (ECON30) Solutions
2 Final (Version ) ECON30/Winter004/Annen PART : Monopoly and Monopoly Behavior ) In a market with a monopolist who is maintaining seconddegree price discrimination the consumer surplus is necessarily zero.. b) False. ( points) ) If he produces anything at all, a profitmaximizing monopolist with some fixed costs and no variable costs will set price and output so as to maximize revenue. 3) If a supplier has a monopoly in a market, the outcome is necessarily inefficient. 4) A market is characterized by imperfect competition if firms are price takers.. b) False. ( points) 5) A monopolist with the cost function c ( q) = 0 + q faces the inverse demand curve p = 80 4q. Calculate the output and the price that maximize the monopolist s profit. Calculate the monopolist s profit. Calculation: MC=q; MR=808q; q=808q; 0q=80; q=8; p=08 Profit=RC=8*0808^=600 m = _8 p m = 08 π m = 600_ (3 points) 6) Consider the monopolist in 5) and assume that this monopolist behaves perfectly competitive. Calculate the output and the price that maximize the monopolist s profit, and calculate its profit under this assumption. Calculation: MC=q MR=804q; q=804q; 6q=80; q=30; p=60 Profit=RC=30* ^=880 c = _30 p c = 60 π c = _880 (3 points) 7) Consider the monopolist in 5) and 6). Calculate the deadweight loss in this market that is due to the fact that this monopolist has market power. Calculation: (*4)/+(*48)/=43 Final Answer: Deadweight Loss= 43 (4 points) 8) Bulkdiscount is an example of seconddegree price discrimination.. b) False. ( points)
3 Final (Version ) ECON30/Winter004/Annen 3 9) A monopolist has decreasing average costs as output increases. If the monopolist sets price equal to average cost, it will produce too much output from the standpoint of efficiency. 0) Isabel has just written an interesting new book. Her publisher estimates that the demand for her book among students will be D S ( p) = 500 0p, and the demand among other people will be D o ( p) = p. The publisher has a cost function of c( q) = 0 + 4q. Calculate the output and price that maximize the publisher s profit if the publisher has to charge the same price for students and other people. Calculation: Total Demand = p; Inverse demand: p=0/40 q; MC=4; MR=0/0 q; 4=0/0 q; 6=/0 q; q=30; p= = _30 p = (4 points) ) Consider the same situation than in question 0). But assume now that the publisher can charge a different price for students and other people. Calculate the output and price that maximize the publisher s profit in the market with students and in the market with other people. Calculation: Students: MC=4; MR=5/0 q; 4=5/0 q=; 0=q; p=5/0*0=9/ Other people: MC=4; MR=5/0 q; 4=5/0 q; =/0 q; q=0; p=5 /0 0=9.5 S = _0 p S = 4.5 q o = _0 p o = 9.5_(4 points) ) A firm has discovered a new kind of nonfattening, nonhabitforming dessert called zwiffle. It doesn't taste very good, but some people like it and it can be produced from old newspapers at zero marginal cost. Before any zwiffle could be produced, the firm would have to spend a fixed cost of $ F. Demand for zwiffle is given by the equation q = p. The firm has a patent on zwiffle, so it can have a monopoly in this market. a) The firm will produce zwiffle only if F is less than or equal to 36. b) The firm will not produce zwiffle if F >. c) The firm will produce units of zwiffle. d) The firm will produce 9 units of zwiffle. e) None of the above. (4 points) 3) A monopolist that produces a positive amount of output maximizes profits where marginal revenue equals marginal cost.
4 Final (Version ) ECON30/Winter004/Annen 4 PART : Oligopoly 4) A Stackelberg leader will necessarily make at least as much profit as he would if he acted as a Cournot oligopolist.. b) False. ( points) 5) The monopoly outcome in a given market generates a higher total industry output than the Stackelberg outcome in this market. 6) The reaction function of firm measures profits for any given level of output of firm and output of firm. 7) There are two major producers of corncob pipes in the world, both located in Herman, Missouri. Suppose that the inverse demand function for corncob pipes is described by 0 6( q + q ), where q and q is firm s and firm s output respectively. Marginal costs are MC = for both firms. Calculate Cournot equilibrium in this market. Calculation: Reaction function firm : MC=; R=0q6q^6q*q; MR=0 q6 q. =0 q 6 q; q=59/6/ q. In equilibrium, q=q=q since firms are symmetric. q=59/6 / q;.5 q=59/6; q=6.556 = _6.556 q = (4 points) 8) Consider again the market in exercise 7). Calculate the Stackelberg outcome assuming that firm can move first and firm second. Calculation: Reaction function firm : q=59/6/q; MR of firm : R=0 q 6 q^ 6 q (59/6 / q); MR=0 q q; 66 q; =6 6 q; q = 59/6=9.833; q=59/69.5/6=4.9 = _9.833 q = _4.9 (4 points) 9) The situation in which firms in an oligopoly compete with respect to prices is called Bertrand competition. PART 3: Game Theory 0) A twoperson game in which each person has access to only two possible strategies will have at most one Nash equilibrium.
5 Final (Version ) ECON30/Winter004/Annen 5 ) A general has the two possible pure strategies, sending all of his troops by land or sending all of his troops by sea. An example of a mixed strategy is where he sends /4 of his troops by land and 3/4 of his troops by sea. ) Consider the static game as described by the following payoff matrix. (i) (ii) (iii) L R T ,, B 3,5 0,0 The Row player has a dominant strategy. b) False The Column player has a dominant strategy. b) False Find all pure strategy Nash equilibria in this game. Final Answer: (T,L) (6 points) 3) A dominant strategy equilibrium is a set of choices such that each player's choices are optimal regardless of what the other players choose. 4) Consider a revised version of the game Rock, Paper, Scissors. In this revised version each of the two players has a forth option which is called Dynamite. The rule is that Dynamite beats Rock, Paper, and Scissors. Assume that the winner gets a payoff of ; looser gets a payoff of ; and in case of a tie, both get 0. (i) Analyze this situation as a game and write down the payoff matrix. Rock Paper Sci Dy Rock 0,0 ,, , Paper, 0,0 , , Sci ,, 0,0 , Dyn,,, 0,0 (ii) (iii) Indicate whether the Row and/or the Column player have a dominant strategy. If yes, what is the dominant strategy? Final answer:_dyn is a dominant strategy for both players. Compute all pure Nash equilibria in this game: Final answer: (Dyn, Dyn) (6 points)
6 Final (Version ) ECON30/Winter004/Annen 6 5) The Prisoner s dilemma has one dominant strategy equilibrium. PART 4: Asymmetric Information 6) The fact that an insurance company must be concerned about the possibility that someone will buy fire insurance on a building and then set fire to it is an example of adverse selection. 7) A firm hires two kinds of workers, alphas and betas. The population at large has equal number of alphas and betas. One can't tell a beta from an alpha by looking at her, but an alpha will produce $3,000 worth of output per month and a beta will produce $,500 worth of output in a month. The firm decides to distinguish alphas from betas by having workers take an examination. A worker will be paid $3,000 if she gets at least 60 answers right and $,500 otherwise. For each question that they get right on the exam, alphas have to spend / hour studying and betas have to spend hour. For either type, an hour's studying is as bad as giving up $0 of income per month. This scheme leads to a) a separating equilibrium where alphas score 60 and betas score 0. b) a pooling equilibrium where alphas score 60 and betas score 0. c) a pooling equilibrium where everybody scores 60. d) a pooling equilibrium where everybody scores 0. e) a separating equilibrium where everybody scores 60. (4 points) 8) In a market where there is signaling, a separating equilibrium occurs when economic agents separate their actions as consumers from their actions as producers. 9) In Guelph, Ontario, there are many used cars for sale; the fraction q of these cars are good and the fraction q of them are lemons. Owners of lemons are willing to sell them for $00. Owners of good used cars are willing to sell them for prices above $,500 but will keep them if the price is lower than $,500. There is a large number of potential buyers who is willing to pay $400 for a lemon and $,500 for a good car. Buyers can't tell good cars from bad, but original owners know. (i.) What is the price of a used car if q = 0. 5 (Assume that sellers get the whole exchange surplus). Calculation: < 500; owners of good cars won t sell. Final Answer: p = $400. (ii.) What is the price of a used car if q = 0. (Assume that sellers get the whole exchange surplus). Calculation: $40+ $50=90>500; owners of good cars will sell. Final Answer: p = _90. (4 points)
7 Final (Version ) ECON30/Winter004/Annen 7 30) An example of adverse selection is the situation where someone chooses a car that is not as good as it is claimed to be. PART 5: Externalities 3) If your consumption of toothpaste produces positive externalities for your neighbors (which you ignore), then you are consuming less toothpaste than is Pareto optimal. 3) A noisy production plant disturbing a professor when writing a research paper with profound insights is an example of a consumption externality. 33) A trade between two people is an example of an externality. 34) Suppose that in Halifax the cost of operating a lobster boat is $4,000 per month. Suppose that if x lobster boats operate in the bay, the total monthly revenue from lobster boats in the bay is 000(x x ). (i) If there are no restrictions on entry and new boats come into the bay until there is no profit to be made by a new entrant, then how many boats will enter? Calculation: 000 (x)=4000; x = 4; x=8 (ii) Final answer: x = 8 (3 points) If the number of boats that operate in the bay is regulated to maximize total profits, then how many boats will enter? Calculation: 000 ( x) = 4000; x=4 Final answer: x = 4 (3 points) PART 6: ExtraPoint Question 35) Find the mixed strategy Nash equilibrium in the static game described by the payoff matrix below. L R T,0 0, B 0,,0 Final Answer: (r=/3, c=/3) where r= prob of playing T and c= prob of playing L. (4 points)
Economics 203: Intermediate Microeconomics I Lab Exercise #11. Buy Building Lease F1 = 500 F1 = 750 Firm 2 F2 = 500 F2 = 400
Page 1 March 19, 2012 Section 1: Test Your Understanding Economics 203: Intermediate Microeconomics I Lab Exercise #11 The following payoff matrix represents the longrun payoffs for two duopolists faced
More informationOligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.
Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry
More informationPrice competition with homogenous products: The Bertrand duopoly model [Simultaneous move price setting duopoly]
ECON9 (Spring 0) & 350 (Tutorial ) Chapter Monopolistic Competition and Oligopoly (Part ) Price competition with homogenous products: The Bertrand duopoly model [Simultaneous move price setting duopoly]
More informationMarket Structure: Duopoly and Oligopoly
WSG10 7/7/03 4:24 PM Page 145 10 Market Structure: Duopoly and Oligopoly OVERVIEW An oligopoly is an industry comprising a few firms. A duopoly, which is a special case of oligopoly, is an industry consisting
More informationCHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition
CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates
More informationCHAPTER 18 MARKETS WITH MARKET POWER Principles of Economics in Context (Goodwin et al.)
CHAPTER 18 MARKETS WITH MARKET POWER Principles of Economics in Context (Goodwin et al.) Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates the
More informationWeek 7  Game Theory and Industrial Organisation
Week 7  Game Theory and Industrial Organisation The Cournot and Bertrand models are the two basic templates for models of oligopoly; industry structures with a small number of firms. There are a number
More informationOligopoly and Strategic Pricing
R.E.Marks 1998 Oligopoly 1 R.E.Marks 1998 Oligopoly Oligopoly and Strategic Pricing In this section we consider how firms compete when there are few sellers an oligopolistic market (from the Greek). Small
More informationExtreme cases. In between cases
CHAPTER 16 OLIGOPOLY FOUR TYPES OF MARKET STRUCTURE Extreme cases PERFECTLY COMPETITION Many firms No barriers to entry Identical products MONOPOLY One firm Huge barriers to entry Unique product In between
More informationCHAPTER 6 MARKET STRUCTURE
CHAPTER 6 MARKET STRUCTURE CHAPTER SUMMARY This chapter presents an economic analysis of market structure. It starts with perfect competition as a benchmark. Potential barriers to entry, that might limit
More informationFinal Exam (Version 1) Answers
Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal
More informationMikroekonomia B by Mikolaj Czajkowski. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Mikroekonomia B by Mikolaj Czajkowski Test 12  Oligopoly Name Group MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The market structure in which
More informationECON101 STUDY GUIDE 7 CHAPTER 14
ECON101 STUDY GUIDE 7 CHAPTER 14 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) An oligopoly firm is similar to a monopolistically competitive
More informationAggressive Advertisement. Normal Advertisement Aggressive Advertisement. Normal Advertisement
Professor Scholz Posted: 11/10/2009 Economics 101, Problem Set #9, brief answers Due: 11/17/2009 Oligopoly and Monopolistic Competition Please SHOW your work and, if you have room, do the assignment on
More informationManagerial Economics & Business Strategy Chapter 9. Basic Oligopoly Models
Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models Overview I. Conditions for Oligopoly? II. Role of Strategic Interdependence III. Profit Maximization in Four Oligopoly Settings
More informationMarginal cost. Average cost. Marginal revenue 10 20 40
Economics 101 Fall 2011 Homework #6 Due: 12/13/2010 in lecture Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework
More information4. Market Structures. Learning Objectives 463. Market Structures
1. Supply and Demand: Introduction 3 2. Supply and Demand: Consumer Demand 33 3. Supply and Demand: Company Analysis 43 4. Market Structures 63 5. Key Formulas 81 2014 Allen Resources, Inc. All rights
More informationCompetition and Regulation. Lecture 2: Background on imperfect competition
Competition and Regulation Lecture 2: Background on imperfect competition Monopoly A monopolist maximizes its profits, choosing simultaneously quantity and prices, taking the Demand as a contraint; The
More informationChapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit
Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit 1) Accountants include costs as part of a firm's costs, while economists include costs. A) explicit; no explicit B) implicit;
More informationChapter 9 Basic Oligopoly Models
Managerial Economics & Business Strategy Chapter 9 Basic Oligopoly Models McGrawHill/Irwin Copyright 2010 by the McGrawHill Companies, Inc. All rights reserved. Overview I. Conditions for Oligopoly?
More informationOligopoly. Oligopoly is a market structure in which the number of sellers is small.
Oligopoly Oligopoly is a market structure in which the number of sellers is small. Oligopoly requires strategic thinking, unlike perfect competition, monopoly, and monopolistic competition. Under perfect
More informationLearning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly
Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision
More information12 Monopolistic Competition and Oligopoly
12 Monopolistic Competition and Oligopoly Read Pindyck and Rubinfeld (2012), Chapter 12 09/04/2015 CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition
More informationEC508: Microeconomic Theory Midterm 3
EC508: Microeconomic Theory Midterm 3 Instructions: Neatly write your name on the top right hand side of the exam. There are 25 points possible. Your exam solution is due Tuesday Nov 24, 2015 at 5pm. You
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes
More informationChapter 16 Oligopoly. 16.1 What Is Oligopoly? 1) Describe the characteristics of an oligopoly.
Chapter 16 Oligopoly 16.1 What Is Oligopoly? 1) Describe the characteristics of an oligopoly. Answer: There are a small number of firms that act interdependently. They are tempted to form a cartel and
More informationChoose the single best answer for each question. Do all of your scratchwork in the side and bottom margins of pages.
Econ 0, Sections 3 and 4, S, Schroeter Exam #4, Special code = 000 Choose the single best answer for each question. Do all of your scratchwork in the side and bottom margins of pages.. Gordon is the owner
More informationCournot s model of oligopoly
Cournot s model of oligopoly Single good produced by n firms Cost to firm i of producing q i units: C i (q i ), where C i is nonnegative and increasing If firms total output is Q then market price is P(Q),
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Economics 103 Spring 2012: Multiple choice review questions for final exam. Exam will cover chapters on perfect competition, monopoly, monopolistic competition and oligopoly up to the Nash equilibrium
More informationPreTest Chapter 23 ed17
PreTest Chapter 23 ed17 Multiple Choice Questions 1. The kinkeddemand curve model of oligopoly: A. assumes a firm's rivals will ignore a price cut but match a price increase. B. embodies the possibility
More informationChapter 12 Monopolistic Competition and Oligopoly
Chapter Monopolistic Competition and Oligopoly Review Questions. What are the characteristics of a monopolistically competitive market? What happens to the equilibrium price and quantity in such a market
More informationChapter 11. T he economy that we. The World of Oligopoly: Preliminaries to Successful Entry. 11.1 Production in a Nonnatural Monopoly Situation
Chapter T he economy that we are studying in this book is still extremely primitive. At the present time, it has only a few productive enterprises, all of which are monopolies. This economy is certainly
More informationMicroeconomics. Lecture Outline. Claudia Vogel. Winter Term 2009/2010. Part III Market Structure and Competitive Strategy
Microeconomics Claudia Vogel EUV Winter Term 2009/2010 Claudia Vogel (EUV) Microeconomics Winter Term 2009/2010 1 / 25 Lecture Outline Part III Market Structure and Competitive Strategy 12 Monopolistic
More informationChapter 15: Monopoly WHY MONOPOLIES ARISE HOW MONOPOLIES MAKE PRODUCTION AND PRICING DECISIONS
Chapter 15: While a competitive firm is a taker, a monopoly firm is a maker. A firm is considered a monopoly if... it is the sole seller of its product. its product does not have close substitutes. The
More informationImperfect Competition. Oligopoly. Types of Imperfectly Competitive Markets. Imperfect Competition. Markets With Only a Few Sellers
Imperfect Competition Oligopoly Chapter 16 Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. Copyright 2001 by Harcourt, Inc. All rights reserved.
More information5. Suppose demand is perfectly elastic, and the supply of the good in question
ECON 1620 Basic Economics Principles 2010 2011 2 nd Semester Mid term test (1) : 40 multiple choice questions Time allowed : 60 minutes 1. When demand is inelastic the price elasticity of demand is (A)
More informationFigure: Computing Monopoly Profit
Name: Date: 1. Most electric, gas, and water companies are examples of: A) unregulated monopolies. B) natural monopolies. C) restrictedinput monopolies. D) sunkcost monopolies. Use the following to answer
More informationFINAL EXAM, Econ 171, March, 2015, with answers
FINAL EXAM, Econ 171, March, 2015, with answers There are 9 questions. Answer any 8 of them. Good luck! Problem 1. (True or False) If a player has a dominant strategy in a simultaneousmove game, then
More informationUniversity of Hong Kong ECON6021 Microeconomic Analysis Oligopoly
1 Introduction University of Hong Kong ECON6021 Microeconomic Analysis Oligopoly There are many real life examples that the participants have nonnegligible influence on the market. In such markets, every
More informationManagerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets
Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect
More informationChapter 7 Monopoly, Oligopoly and Strategy
Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that
More informationchapter: Oligopoly Krugman/Wells Economics 2009 Worth Publishers 1 of 35
chapter: 15 >> Oligopoly Krugman/Wells Economics 2009 Worth Publishers 1 of 35 WHAT YOU WILL LEARN IN THIS CHAPTER The meaning of oligopoly, and why it occurs Why oligopolists have an incentive to act
More informationEcon 111 (04) 2nd Midterm A
Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)
More informationLECTURE #15: MICROECONOMICS CHAPTER 17
LECTURE #15: MICROECONOMICS CHAPTER 17 I. IMPORTANT DEFINITIONS A. Oligopoly: a market structure with a few sellers offering similar or identical products. B. Game Theory: the study of how people behave
More informationEconomics II: Micro Fall 2009 Exercise session 5. Market with a sole supplier is Monopolistic.
Economics II: Micro Fall 009 Exercise session 5 VŠE 1 Review Optimal production: Independent of the level of market concentration, optimal level of production is where MR = MC. Monopoly: Market with a
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Test 2 Review Econ 201, V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Barbara left a $25,000 job as an architect to run a catering
More informationChapter 18. Asymmetric Information. The buyer needs a hundred eyes, the seller not one. George Herbert (1651)
Chapter 18 Asymmetric Information The buyer needs a hundred eyes, the seller not one. George Herbert (1651) Chapter 18 Outline 18.1 Problems Due to Asymmetric Information 18.2 Responses to Adverse Selection
More informationECON 40050 Game Theory Exam 1  Answer Key. 4) All exams must be turned in by 1:45 pm. No extensions will be granted.
1 ECON 40050 Game Theory Exam 1  Answer Key Instructions: 1) You may use a pen or pencil, a handheld nonprogrammable calculator, and a ruler. No other materials may be at or near your desk. Books, coats,
More informationEcn 221  Unit 10 Monopolistic Competition & Oligopoly
Ecn 221  Unit 10 Monopolistic Competition & Oligopoly An industry characterized by monopolistic competition is similar to the case of perfect competition in that there are many firms, and entry into the
More informationThe Basics of Game Theory
Sloan School of Management 15.010/15.011 Massachusetts Institute of Technology RECITATION NOTES #7 The Basics of Game Theory Friday  November 5, 2004 OUTLINE OF TODAY S RECITATION 1. Game theory definitions:
More informationA. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.
1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change
More informationVariable Cost. Marginal Cost. Average Variable Cost 0 $50 $50 $0     1 $150 A B C D E F 2 G H I $120 J K L 3 M N O P Q $120 R
Class: Date: ID: A Principles Fall 2013 Midterm 3 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Trevor s Tire Company produced and sold 500 tires. The
More informationa. Retail market for water and sewerage services Answer: Monopolistic competition, many firms each selling differentiated products.
Chapter 16 1. In which market structure would you place each of the following products: monopoly, oligopoly, monopolistic competition, or perfect competition? Why? a. Retail market for water and sewerage
More informationOligopoly. Unit 4: Imperfect Competition. Unit 4: Imperfect Competition 44. Oligopolies FOUR MARKET MODELS
1 Unit 4: Imperfect Competition FOUR MARKET MODELS Perfect Competition Monopolistic Competition Pure Characteristics of Oligopolies: A Few Large Producers (Less than 10) Identical or Differentiated Products
More informationAGEC 105 Spring 2016 Homework 7. 1. Consider a monopolist that faces the demand curve given in the following table.
AGEC 105 Spring 2016 Homework 7 1. Consider a monopolist that faces the demand curve given in the following table. a. Fill in the table by calculating total revenue and marginal revenue at each price.
More information13 MONOPOLISTIC COMPETITION AND OLIGOPOLY. Chapter. Key Concepts
Chapter 13 MONOPOLISTIC COMPETITION AND OLIGOPOLY Key Concepts Monopolistic Competition The market structure of most industries lies between the extremes of perfect competition and monopoly. Monopolistic
More informationT28 OLIGOPOLY 3/1/15
T28 OLIGOPOLY 3/1/15 1. Oligopoly is a market structure in which there are a small number of firms that engage in strategic interactions. If there are only two firms then we refer to the situation as a
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)
More informationEconomics Instructor Miller Oligopoly Practice Problems
Economics Instructor Miller Oligopoly Practice Problems 1. An oligopolistic industry is characterized by all of the following except A) existence of entry barriers. B) the possibility of reaping long run
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The fourfirm concentration ratio equals the percentage of the value of accounted for by the four
More informationProblem Set 9 (75 points)
Problem Set 9 (75 points) 1. A student argues, "If a monopolist finds a way of producing a good at lower cost, he will not lower his price. Because he is a monopolist, he will keep the price and the quantity
More informationAll these models were characterized by constant returns to scale technologies and perfectly competitive markets.
Economies of scale and international trade In the models discussed so far, differences in prices across countries (the source of gains from trade) were attributed to differences in resources/technology.
More informationThus MR(Q) = P (Q) Q P (Q 1) (Q 1) < P (Q) Q P (Q) (Q 1) = P (Q), since P (Q 1) > P (Q).
A monopolist s marginal revenue is always less than or equal to the price of the good. Marginal revenue is the amount of revenue the firm receives for each additional unit of output. It is the difference
More informationEcon 201, Microeconomics Principles, Final Exam Version 1
Econ 201, Microeconomics Principles, Final Exam Version 1 Instructions: Please complete your answer sheet by filling in your name, student ID number, and identifying the version of your test (1 or 2).
More informationMiami Dade College ECO 2023 Principles of Microeconomics  Fall 2014 Practice Test #3
Miami Dade College ECO 2023 Principles of Microeconomics  Fall 2014 Practice Test #3 1. Papabear Corporation is a single seller of Wonderstuff. There are two substitutes for Wonderstuff. Given this situation,
More informationProblems on Perfect Competition & Monopoly
Problems on Perfect Competition & Monopoly 1. True and False questions. Indicate whether each of the following statements is true or false and why. (a) In longrun equilibrium, every firm in a perfectly
More informationOligopoly is a market structure more susceptible to gametheoretic analysis, because of apparent strategic interdependence among a few producers.
1 Market structure from a gametheoretic perspective: Oligopoly After our more theoretical analysis of different zerosum and variablesum games, let us return to the more familiar territory of economicsespecially
More informationChapter 13 Market Structure and Competition
Chapter 13 Market Structure and Competition Solutions to Review Questions 1. Explain why, at a Cournot equilibrium with two firms, neither firm would have any regret about its output choice after it observes
More informationMonopolistic Competition
In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what
More informationCOMMERCE MENTORSHIP PROGRAM COMM295: MANAGERIAL ECONOMICS FINAL EXAM REVIEW SOLUTION KEY
COMMERCE MENTORSHIP PROGRAM COMM295: MANAGERIAL ECONOMICS FINAL EXAM REVIEW SOLUTION KEY WR1 SamIAm is a local restaurant chain located in Vancouver. It is considering different pricing strategies for
More informationMicroeconomics II. ELTE Faculty of Social Sciences, Department of Economics. week 9 MARKET THEORY AND MARKETING, PART 3
MICROECONOMICS II. ELTE Faculty of Social Sciences, Department of Economics Microeconomics II. MARKET THEORY AND MARKETING, PART 3 Author: Supervised by February 2011 Prepared by:, using Jack Hirshleifer,
More informationECON 600 Lecture 5: Market Structure  Monopoly. Monopoly: a firm that is the only seller of a good or service with no close substitutes.
I. The Definition of Monopoly ECON 600 Lecture 5: Market Structure  Monopoly Monopoly: a firm that is the only seller of a good or service with no close substitutes. This definition is abstract, just
More informationMarket Structure: Oligopoly (Imperfect Competition)
Market Structure: Oligopoly (Imperfect Competition) I. Characteristics of Imperfectly Competitive Industries A. Monopolistic Competition large number of potential buyers and sellers differentiated product
More informationBusiness Ethics Concepts & Cases
Business Ethics Concepts & Cases Manuel G. Velasquez Chapter Four Ethics in the Marketplace Definition of Market A forum in which people come together to exchange ownership of goods; a place where goods
More informationMonopoly: Linear pricing. Econ 171 1
Monopoly: Linear pricing Econ 171 1 The only firm in the market Marginal Revenue market demand is the firm s demand output decisions affect market clearing price $/unit P 1 P 2 L G Demand Q 1 Q 2 Quantity
More informationCommon in European countries government runs telephone, water, electric companies.
Public ownership Common in European countries government runs telephone, water, electric companies. US: Postal service. Because delivery of mail seems to be natural monopoly. Private ownership incentive
More informationEcon 202 Exam 3 Practice Problems
Econ 202 Exam 3 Practice Problems Principles of Microeconomics Dr. Phillip Miller Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 13 Production and
More informationHow to Solve Strategic Games? Dominant Strategies
How to Solve Strategic Games? There are three main concepts to solve strategic games: 1. Dominant Strategies & Dominant Strategy Equilibrium 2. Dominated Strategies & Iterative Elimination of Dominated
More informationSummary Chapter 12 Monopoly
Summary Chapter 12 Monopoly Defining Monopoly  A monopoly is a market structure in which a single seller of a product with no close substitutes serves the entire market  One practical measure for deciding
More informationMODULE 64: INTRODUCTION TO OLIGOPOLY Schmidty School of Economics. Wednesday, December 4, 2013 9:20:15 PM Central Standard Time
MODULE 64: INTRODUCTION TO OLIGOPOLY Schmidty School of Economics Learning Targets I Can Understand why oligopolists have an incentive to act in ways that reduce their combined profit. Explain why oligopolies
More informationMonopoly. Examples: Microsoft and Windows, DeBeers and diamonds, your local natural gas company.
Monopoly A monopoly is a firm who is the sole seller of its product, and where there are no close substitutes. An unregulated monopoly has market power and can influence prices. Examples: Microsoft and
More information1 st Exam. 7. Cindy's crossprice elasticity of magazine demand with respect to the price of books is
1 st Exam 1. Marginal utility measures: A) the total utility of all your consumption B) the total utility divided by the price of the good C) the increase in utility from consuming one additional unit
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.
Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is
More informationCooleconomics.com Monopolistic Competition and Oligopoly. Contents:
Cooleconomics.com Monopolistic Competition and Oligopoly Contents: Monopolistic Competition Attributes Short Run performance Long run performance Excess capacity Importance of Advertising Socialist Critique
More informationNONCOOPERATIVE OLIGOPOLY MODELS
NONCOOPERATIVE OLIGOPOLY MODELS 1. INTRODUCTION AND DEFINITIONS Definition 1 (Oligopoly). Noncooperative oligopoly is a market where a small number of firms act independently but are aware of each other
More information2. Suppose two Cournot duopolist rms operate at zero marginal cost. The market demand is p = a bq. Firm 1 s bestresponse function is
Econ301 (summer 2007) Quiz 1 Date: Jul 5 07 Instructor: Helen Yang PART I: Multiple Choice (5 points each, 75 points in total) 1. In the long run, a monopolistically competitive rm (a) operates at full
More informationEcon 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.
, Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profitmaximizing monopolist, a. MR
More informationRutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003
Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003 Answers to Problem Set 11 Chapter 16 2. a. If there were many suppliers of diamonds, price would equal marginal
More informationThe Analysis of the Article Microsoft's Aggressive New Pricing Strategy Using. Microeconomic Theory
2 The Analysis of the Article Microsoft's Aggressive New Pricing Strategy Using Microeconomic Theory I. Introduction: monopolistic power as a means of getting high profits II. The review of the article
More informationThis handout gives an overview of the main market structures including perfect competition, monopoly, monopolistic competition, and oligopoly.
Market Structures This handout gives an overview of the main market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. Summary Chart Perfect Competition Monopoly
More informationChapter 14 Monopoly. 14.1 Monopoly and How It Arises
Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a
More informationNew Technology and Profits
Another useful comparative statics exercise is to determine how much a firm would pay to reduce its marginal costs to that of its competitor. This will simply be the difference between its profits with
More informationStudy Guide Exam 3 Fall 2011
Study Guide Exam 3 Fall 2011 Student: Suppose that there are just two firms in a small market. Acme Manufacturing's Total Costs equal $100 + $3 Qty. Generic Industries' Total Costs equal $500 + $3 Qty.
More informationOligopoly and Strategic Behavior
Oligopoly and Strategic Behavior MULTIPLECHOICE QUESTIONS Like a pure monopoly, an oligopoly is characterized by: a. free entry and exit in the long run. b. free entry and exit in the short run. c. significant
More informationPractice Questions Week 8 Day 1
Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants
More informationChapter 13: Strategic Decision Making in Oligopoly Markets
Learning Objectives After reading Chapter 13 and working the problems for Chapter 13 in the textbook and in this Workbook, you should be able to do the following things For simultaneous decisions: Explain
More informationUNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition
UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on
More informationMonopolistic Competition
Monopolistic Chapter 17 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College
More informationFinance 360 Problem Set #8 Solutions
Finance 360 Problem Set #8 Solutions ) Consider the game of chicken. Two players drive their cars down the center of the road directly at each other. Each player chooses SWERVE or STAY. Staying wins you
More information