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Question 2.
Explain how organizations can collude to raise
Collusion is an agreement between firms to set the prices of their goods to gain an advantage. Equilibrium in market is disrupted as supply and demand is no more natural.
Organizations can collude to raise prices of products to increase their profits or say to maximize industry profits. As a result, the prices will be higher than the market clearing prices and output will be lower.
Price fixing can be used to set the prices high rather then determining through market forces. Horizontal price fixing can be used to set the prices of products. Price leadership can be followed where the dominant firm will set a price and other firms will follow it by setting the same price.
By restricting output, or say by deciding to produce a limited and fixed output, firms can form collusion and can set high price.
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Solved in 4 steps with 1 images
- 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 solutiona) True or False and Explain: A profit maximizing monopolist has no limit to how high they set the price. b) True of False and explain: When there are economies of scale in production it is possible for a competitive market to sustain the competitive equilibrium. c) When there are economies of scale in production, why is it beneficial to have only one producer?d. Suppose the government imposes an average pricing rule, requiring the monopolist to set its price equal to the average total cost. Place the point labeled “Average cost pricing” at the appropriate coordinates to indicate the firm's price and quantity under this rule. Please place the Monoploy Pricing, Marginal Cost Pricing, and Average Cost Pricing on their appropriate places on the graph. Thank you!
- Why does monopoly arise? How does monopoly make profit and loss? Graphically explainWrite down a homogeneous good cartel model of quantity choice with two firms. State andexplain the key assumptions of the model. Using the model, answer:(a) Analyse and explain how the cartel would decide the optimal quantity for each firm.Figure shows the market for a successful price-fixing arrangement (cartel) between two identical firms. When the two firms act like one and charge the same price. a/What will be the market price? b/How much each firm will produce and sell quantity?
- The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinational enterprise that supplies Hi-tech components. Use the graph to answer the questions that follow. "image" i. State the elasticity of the monopoly firm demand curve. ii. Considering the figure, examine the benefits of the characteristics of themonopoly demand curve to ABC Inc. Ltd. iii. Suppose the demand and cost curves result in ABC Inc. Ltd earning aneconomic profit. Do you think ABC Inc. Ltd firm will earn profit in the longrun? Explain your answer. Assume all factors constant. iv. Examine the effects of ABC Inc. Ltd on consumers.Assume a market for petroleum products, and let D denote the demand of petroleum products while MC the marginal cost. The inverse demand is p = 100 - q, and the MC is MC = q.a. Use a figure to depict the competitive outcome assuming many producer and many consumers. Derive the competitive equilibrium outcome.b. Use a second figure to explain the monopoly solution assuming a single seller. Derive the monopoly solution.1. Suppose there are two firms who are Cournot duopolists (set quantity simultaneously) in the wine business. The inverse demand for wine is given by P(Q) = 300 – 0.20. One firm has marginal costs of $45 and the other firm has marginal costs of S30. What is the total output produced in the market?
- The following table presents the valuations that 5 different consumers have for 2 different products. The production costs are $10 per unit of good A and $10 per unit of good B. The firm producing them can choose to price them independently or using a bundling strategy. What is the profit the firm will realize, if it prices optimally? VALUATIONS Product A Product B Consumer 1 5 95 Consumer 2 10 90 Consumer 3 50 50 Consumer 4 80 20 Consumer 5 95 5 ANSWER SHOULD BE 410. I will like if it is right! showing my support. Thank you.8, Cartels which are not backed by strong legal provisions (sanctions) are likely to have a short and turbulent life. Explain why? Briefly for managerial economics class1. Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not? 2. What stops oligopolists from acting together as a monopolist and earning the highest possible level of profits? Is there a way for oligopolists to attempt to maximize profits? What are the risks of such attempts (and utimately, generally cause such attempts to fail)?