Scenario 2: Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30-Q The marginal cost to produce this new drink is $3. Refer to Scenario 2. What will be the price of this new drink in the long run if the industry is a Bertrand duopoly? OA. $13.50 OB. $9 OC. $12 OD. $3 OE. None of the above D

Scenario 2: Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30-Q The marginal cost to produce this new drink is $3. Refer to Scenario 2. What will be the price of this new drink in the long run if the industry is a Bertrand duopoly? OA. $13.50 OB. $9 OC. $12 OD. $3 OE. None of the above D

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 7P

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QUESTION 4 Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 53 - Q. The marginal cost to produce this new drink is $5. What price would this new drink sell for if the market was a Stackelberg duopoly? OA. $17 ОВ. $21 С. $29 OD. $16.50
Why are oligopolistic firms not productively efficient? OA. They eliminate consumer surplus in order to increase their profits. OB. They are able to earn positive economic profits in the long run. OC. They produce at a level of output below the point where average total costs are lowest. OD. They produce at costs below the cost of new entrants. ← PREVIOUS omission Ž C SUBMIT A Gi VIEW
The graph below shows the demand curve for a perfectly competitive firm. Suppose that firms in this industry discover a way to differentiate their products. Using the line drawing tool, show how the firm's demand curve would be likely to change. Label the new demand curve 'd,'. Carefully follow the instructions above, and only draw the required objects. Since the demand curve is downward sloping, the monopolistically competitive firm will set a price OA. that is less than marginal cost. B. that is unrelated to marginal cost. OC. that is equal to marginal cost. D. that is greater than marginal cost. Price 10- Q Q Output 10
Consider the model with monopolistic competition and full symmetry between the firms (internal returns to scale) in a single integrated market. Now assume that a new technology becomes available that reduces a firm's marginal cost of production by a given amount but requires a larger fixed-cost investment to implement. Suppose that all fırms adopt the new technology. How does this impact the equilibrium number of varieties and the equilibrium price? Show your work. Edit View Insert Format Tools Table
In both perfectly competitive and monopolistically competitive markets, when firms are making positive economic profits, other firms willenter until price equals ATC and profits are zero.Despite these similarities, in a perfectly competitive market total surplus is maximized, while ina monopolistically competitive market surplus isnot maximized. Explain this difference.
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 $11,000
Draw a diagram to show the long-run equilibrium of a firm in a Monopolistically Competitive market clearly labeling the profit maximizing level of Q and P. Is P greater/less than ATC? Is P greater/less than MC? How much profit firm is earning in the long run? Also show the efficient level of outcome and explain why this firm does not produce at the efficient level.
a. b. C. d. Price panel a panel b panel c panel di Price (a) (c) MA MC MR ATC Quantity MC ATC D Quantity Price Price (b) MR (d) MC Quantity MC مما ATC Refer to Figure 3. Assume a monopolistic competitive environment: From the 4 graphs depicted, which one of them represents a short-run equilibrium that encourages the entry of other firms? ATC Quantity D
. What is the Nash equilibrium in this advertising war?a) Coke advertises; Pepsi does not advertise b) Pepsi advertises; Coke does not advertise c) neither of them advertises d) both of them advertise Explain the reasons for your answer? Was any other equilibrium position possible? advertise do not advertise pepsi-advertise coke profit=$50B coke profit =$20B PEPSI profit =$50B pepsi profit =$100B do not advertise coke profit =$100B coke profit =$80B pepsi profit =$20B PEPSI PROFIT =$80 B
Suppose the market for fast-food value meals is monopolistically competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive firm's value meals. How will this figure change as the market moves toward long-run equilibrium? In the long run, O A. the average cost curve and the marginal cost curve will shift up because the firms are currently making profit. O B. the demand curve will shift to the left and become more elastic because the firms are currently making profit. nothing will change because monopolistically competitive markets have barriers to new firms entering. OC. O D. the demand curve will shift to the right and become more elastic because the firms are currently experiencing losses. O E. nothing will change because the firms in this market are breaking even. Price and cost (per value meal) 8.00- 7.60- 7.20 6.80…
encient? Suppose that a company operates in the monopolistically competitive market for electric razors. The following graph shows the demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve for the firm. 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. 3; 100 50 90 80 88 + 70 70 60 550 40 PRICE (Dollars per razor) 30 30 10 MC 20 20 0 10 10 ATC +. ? Mon Comp Outcome MR Demand 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of razors) Min Unit Cost
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 O