If both firms operate independently and do not collude, the most likely economic profit is If both firms operate independently and do not collude, the most likely economic profit isMultiple Choice$475,000 for firm A and $725,000 for firm B.$625,000 for firm A and $625,000 for firm B.$725,000 for firm A and $475,000 for firm B.$400,000 for firm A and $400,000 for firm B. Answer the next question based on the following payoff matrix for two oligopolistic firms in which the numbers indicate the economic profit in thousandsof dollars for a high-price or a low-price strategy.Firm AHighLowPricePrice$625 A =$725AHighprice B$625 B$350%3DFirmВA = $350 A = $400Lowprice B %3D$725 В %3$400If both firms operate independently and do not collude, the most likely economic profit is

Firm A has a dominant strategy of choosing a low price in every situation. So if Firm A is choosing…

If both firms operate independently and do not collude, the most likely economic profit is Multiple Choice $475,000 for firm A and $725,000 for firm B. $625,000 for firm A and $625,000 for firm B. $725,000 for firm A and $475,000 for firm B.

If both firms operate independently and do not collude, the most likely economic profit is Multiple Choice $475,000 for firm A and $725,000 for firm B. $625,000 for firm A and $625,000 for firm B. $725,000 for firm A and $475,000 for firm B.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 15.6IP

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Suppose that an oligopolistic is charging $21 per unit of output and selling 31 units each day. What is its daily total revenue? Also suppose that previously it had lowered its price from $21 to $19, rivals matched the price cut, and the firmâ€™s sales increased from 31 to 32 units. It also previously raised its price from $21 to $23, rivals ignored the price hike, and the firmâ€™s daily total revenue came in at $482. Which of the following is most logical to conclude? The firmâ€™s demand curve is (a) inelastic over the $21 to $23 price range, (b) elastic over the $19 to $21 price range, (c) a linear(straight) down sloping line, or (d) a curve with a kink in it?
At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, “ . . . for the past several years, our individual company growth has come out of the other fellow’s hide.” Kellogg’s has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg’s and its largest rival advertise, each company earns $0 billion in profits. When neither company advertises, each company earns profits of $8 billion.If one company advertises and the other does not, the company that advertises earns $43 billion and the company that does not advertise loses $4 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising?Instruction: Enter your response as a percentage rounded to the nearest whole number.i ≤ percent
At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, “ . . . for the past several years, our individual company growth has come out of the other fellow’s hide.” Kellogg’s has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg’s and its largest rival advertise, each company earns $0 in profits. When neither company advertises, each company earns profits of $12 billion. If one company advertises and the other does not, the company that advertises earns $52 billion and the company that does not advertise loses $4 billion. Under what conditions could these firms use trigger strategies to support the collusive level of advertising?
14 Firm B High Price Low Price Firm A High Price A = $250 B-$250 A = $200 B=$325 Multiple Choice Low Price A $325 B-$200 A=$175 B=$175 Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. Assume that firm B adopts a high-price strategy, firm A maintains a low-price strategy. Compared to the results from a high-price strategy for both firms, firm B will now lose $50 million in profit and firm A will lose $75 million in profit.
At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg’s was quoted as saying, “ . . . for the past several years, our individual company growth has come out of the other fellow’s hide.” Kellogg’s has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg’s and its largest rival advertise, each company earns $2 billion in profits. When neither company advertises, each company earns profits of $16 billion.If one company advertises and the other does not, the company that advertises earns $56 billion and the company that does not advertise loses $4 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising?Instruction: Enter your response as a percentage rounded to the nearest whole number.
5. To advertise or not to advertise Suppose that Expresso and Beantown are the only two firms that sell coffee. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Beantown Advertise Doesn't Advertise Advertise 9, 9 15, 3 Expresso Doesn't Advertise 3, 15 11, 11 For example, the upper right cell shows that if Expresso advertises and Beantown doesn't advertise, Expresso will make a profit of $15 million, and Beantown will make a profit of $3 million. Assume this is a simultaneous game and that Expresso and Beantown are both profit-maximizing firms. If Expresso decides to advertise, it will earn a profit of $ million if Beantown advertises and a profit of $ million if Beantown does not advertise. If Expresso decides not to advertise, it will earn a profit of $ million if Beantown advertises and a profit of $ million if Beantown does not advertise. If Beantown advertises, Expresso makes a higher profit if…
What is the distinguishing characteristics of oligopoly in relation to the other forms of the other market organizations? What is its significance? In which sector of the Zambian economy is oligopoly most relevant? An oligopolistic firm from the telecommunication industry in Zambia follows demand-and-cost situation in 2009.Price in ZWK Quantity Total cost20 7 3619 8 4518 9 5417 10 6316 11 7215 12 81i. How much output should the oligopolistic produce? What price should it charge and what is the maximum profit can this firm earns?
8. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Creamland Dairy King Advertises Doesn't Advertise 9,9 Doesn't Advertise 3, 15 Advertises 15, 3 11, 11 For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million, and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of $ not advertise. If Creamland decides not to advertise, it will earn a profit of $ does not advertise. million if Dairy King advertises and a profit of $ If Dairy King advertises, Creamland makes a higher profit if it chooses million if Dairy King advertises and a profit of $…
4. Farmer Andy and Farmer Betty are the only two farmers that grow heirloom tomatoes for sale at the local farmer's market and compete as Cournot duopolists. The inverse demand curve for heirloom tomatoes at the market is P = 140 - 5Q where P is the %3D price per pound of tomatoes and Q is the number of pounds of tomatoes in hundreds per week; Q = qA + qB. Both Andy and Betty have a cost of growing tomatoes of w = 10, r = 20, and both have K = 1 in the short run. They both have a production function of q = L0.5KO.5. They will both earn profits of --.
4. Consider the following Pricing game. Firms A and B each has two strategies: to charge Low or High price. The following table shows the payoffs for all possible outcomes: Firm B Pricing Strategy Low High Low Firm A 0,0 -200, 400 High 400, -200 100, 100 Suppose that Firms A and B are going to play this game over and over again, forever. Also, suppose both firms agree on the following collusive plan: "We will each charge the high price, provided neither of us has ever charged the low price in any previous period. If one of us cheats and charges the low price, the other player will charge the low price in every period thereafter." Answer the following questions about this infinitely repeated game:
5. To advertise or not to advertise Suppose that Expresso and Beantown are the only two firms that sell coffee. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Expresso Advertise Doesn't Advertise Beantown Advertise 10, 10 2, 18 For example, the upper right cell shows that if Expresso advertises and Beantown doesn't advertise, Expresso will make a profit of $18 million, and Beantown will make a profit of $2 million. Assume this is a simultaneous game and that Expresso and Beantown are both profit-maximizing firms. Doesn't Advertise 18, 2 11, 11 If Expresso decides to advertise, it will earn a profit of S advertise. If Expresso decides not to advertise, it will earn a profit of S not advertise. O O million if Beantown advertises and a profit of s If Beantown advertises, Expresso makes a higher profit if it chooses If Beantown doesn't advertise, Expresso makes a higher profit if it cnot to advertise…
12. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Bean Bruuer Advertise Doesn't Advertise Advertise Hatte Latte Doesn't Advertise 9,9 3,15 15,3 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $3 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing firms. If Hatte Latte chooses to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer…