Which of the following is an example of tacit collusion? a. Price leadership b. Copper cartel c. Government franchise granted to a utility d. OPEC
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Which of the following is an example of tacit collusion?
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- define and discuss the following, present the necessary virtual illustration: a. kinked demand curve b. Game theory c. predatory pricing d. market efficiencyCollusion occurs when firms ________. a. compete with one another by setting a price slightly lower than their rivals' prices b. conspire to set the quantity they produce or the prices they charge c. charge a price equal to their marginal cost of production d. compete with one another by differentiating their productsExercise 3.5. Pablo, Dirk and Franz run the only bar in town. Pablo wants to sell as many drinks as possible without losing money. Dirk wants the bar to bring in as much revenue as possible. Franz wants to make the largest possible profits. Using a single diagram of the bar's demand curve and its cost curves, show the price and quantity combinations favoured by each of the three partners. Explain.
- Explain what bait and switch is and why it is an example of deceptivepricing.Which of the following would most likely create the setting for an Oligopoly ? A. The government grants T'Challa and Nakia a patent for their respective vibranium-based electric car batteries. B. Market Demand is two or more times less than the quantity needed to produce at the minimum of the Average Cost Curve. C. Market Demand is two or more times greater than the quantity needed to produce at the minimum of the Marginal Cost Curve. D. Insumountable technological difficulty associated with producing similar products serves as an effective Barrier to Entry. E. All of the AboveWhen oil prices increased 10 fold during the 1973 – 80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy?
- In an economy with two Individuals ( A and B) discuss the results in exchange in the following situations 1. Perfect competition in which A and B accept prices as given by the market 2.A is a monopolistic and can set any price B chooses 3 A is a perfect price discriminator and can charge a different price for each unit tranded. 4 does each of these lead to a pareto efficient Solution ? It would be useful to work with an Edgeworth Box Diagram to present your solutionWhat do economists mean when they say that competitive markets are more efficient than monopolistic markets? Monopolistic markets result in lower price and higher production Competitive markets result in lower prices, monopolistic market result in higher production Competitive markets result in lower costs, lower prices, and higher levels of production Easy entry and exitSuppose a town only has two petrol stations, United and BP. Each could choose to charge a high price or low price, as shown in the matrix below. ВР BP charges a low price: BP has low profit; United BP charges a high price: BP has no profit; United has high profit United charges a United low price: has low profit ВР United charges a high price: has BP has average profit; United high profit; United has no has average profit profit (a) What is the dominant strategy for the above matrix (i.e., a Nash equilibrium)? Explain briefly (b) If the two petrol stations could collude, what would be the likely strategy? Explain briefly. (c) Briefly explain the principles of the 'kinked' demand curve by using an example such as pricing a product by the two supermarket giants.
- Suppose there are only two automobile companies,Ford and Chevrolet. Ford believes that Chevrolet will match any price it sets, but Chevrolet too is interested in maximizing profit. Use the following price and profit data to answer the following questions. a. What price will Ford charge?b. What price will Chevrolet charge once Ford has set its price?c. What is Ford’s profit after Chevrolet’s response?d. If the two firms collaborated to maximize joint profits, whatprices would they set?e. Given your answer to part (d), how could undetected cheatingon price cause the cheating firm’s profit to rise?Monopolistic competition creates inefficiency because of the Price markups and excess capacity. The graph depicts the situation $100 for a hypothetical monopolistically competitive firm. The 90 curves included in the graph are demand (D), marginal 80 revenue (MR), average total cost (ATC), and marginal cost ATC (MC). Use the graph to find the requested values. 70 60 What is the size of the markup on the price? 50 40 markup: $ 30 What is the size of the excess capacity? 20 MC MR 10 units excess capacity: 20 30 40 50 60 70 80 90 10 100 QuantityCollusion can work if ________. a. a colluder values future monopoly profits more than current profits b. a colluder gives secret price discounts c. a colluder charges a price higher than its partners d. a colluder can cheat without being detected
