Monopolies
Game Theory
Monopolistic Competition
Price Discrimination
Almost sure???
100
Question
What is the firm’s profit-maximizing quantity of output?
What is Q1
Q1Q1 corresponds to the quantity at which marginal revenue equals marginal cost. This profit-maximizing rule, MR=MC, applies to all firms, whether perfect competition, monopoly, monopolistic competition, or oligopoly, as long as producing is preferable to shutting down. If price does not equal or exceed average variable cost, then the firm will shut down rather than produce the quantity at which MR=MC.
100
Uptown Tech
High Price Low Price$
$500,$250 $100,$700
Downtown Tech $200,$400 $600,$350
The Nash equilibrium to this game, if one exists, is ?
what is None of the strategy pairs represents a Nash equilibrium.
Neither firm has a dominant strategy, therefore, none of these strategies represents a Nash equilibrium
100
A monopolistically competitive firm’s demand curve will be least elastic if
what is the number of rival firms producing more differentiated products decreases
The degree of elasticity depends on the number of competitors and the degree of product differentiation. Both a smaller number of rivals and more differentiated products make it more difficult for consumers to be responsive to price changes, therefore, the firm will face a less elastic demand curve.
100
A firm with market power engages in price discrimination in order to
What is increase profits
A firm sets its price equal to the maximum amount a consumer is willing to pay for that unit to capture additional consumer surplus and to increase its profits.
100
One difference between monopolistic competition and oligopoly is that firms in monopolistic competition when it comes to price setting and output is
what is act independently in setting price and output
Firms in monopolistic competition act independently in setting price and output while firms in oligopoly are interdependent in setting price and output.
200
What price will the firm charge
what is P5
P5P5 is determined on the demand curve above the quantity where marginal revenue equals marginal cost. The quantity (output) is determined by the intersection of marginal revenue and marginal cost.
200
Zeb
Lower Prices Same Prices
Art Lower Prices $300; $400 $600; $200
Same Prices $100; $700 $400; $500
The first entry in each cell indicates the profits for Art, and the second entry in each cell indicates the profits for Zeb. Each restaurant independently and simultaneously chooses its action and has complete information of the payoff matrix. Which of the following is a Nash equilibrium?
what is Both Art and Zeb will lower prices.
In Nash equilibrium, both Art and Zeb will charge lower prices. The combination of strategies is Nash because neither party has an incentive to change strategy unilaterally to move to any other combination.
200
For the monopolistically competitive firm represented by the graph above, the allocatively efficient quantity of output is
What is Q3
Q3 corresponds to where marginal cost intersects demand which is the allocatively efficient quantity.
200
What enables a seller to capture the entire consumer surplus in a market?
What is price discrimination
200
First person to hit the buzzer gets 200 free points
LETS GO
300
The graph shows the cost and revenue curves for a profit-maximizing monopolist that produces teddy bears. If the monopolist charges a single price for teddy bears, What is the consumer, producer surplus and deadweight loss?
What is Consumer surplus equals area (a+b), producer surplus equals area (c+d), and deadweight loss equals area (e)
The consumer surplus is the area under the demand curve and above the price, given by area (a+b); the producer surplus is equal to the economic profit of the monopoly, given by area (c+d); and the deadweight loss is given by area (e), indicating the reduction in total economic surplus.
300
Sam’s
Lower Prices Same Prices
Amy’s Lower Prices $300 ;$400 $600 ;$200
Same Prices $100 ;$700 $400 ;$500
he first entry in each cell indicates the profits for Amy’s, and the second entry in each cell indicates the profits for Sam’s. Each restaurant independently and simultaneously chooses its action and has complete information of the payoff matrix. Based on the information and assuming Amy’s and Sam’s do not cooperate, which action will each pursue?
What is Both Amy’s and Sam’s will lower prices.
Setting lower prices is a dominant strategy for both Amy’s and Sam’s.
300
Monopolistically competitive markets are characterized by
What are a large number of firms with some barriers to entry
A large number of firms is a common characteristic in both monopolistic competition and perfect competition.
300
If a monopolist can increase output and profit by engaging in perfect price discrimination, allocative efficiency will do what? and consumer surplus will do what?
What is improve even though consumer surplus goes to zero
A monopolist engaging in perfect price discrimination will continue selling output at the maximum price consumers are willing to pay until price is equal to marginal cost (the allocatively efficient outcome). Therefore, the perfectly price-discriminating monopolist will produce the allocatively efficient quantity of output and consumer surplus will decrease to zero.
300
First person to hit the buzzer gets 300 free points
Lets go
400
The graph shows the cost and revenue curves for a profit-maximizing monopolist that produces teddy bears.If the monopolist engages in perfect price discrimination, what will happen to consumer surplus, producer surplus and deadweight loss?
what is Consumer surplus and deadweight loss will be zero because all economic surplus will be transferred to producer surplus.
Producer surplus will increase, and consumer surplus and the deadweight loss will decrease to zero, because all economic surplus will be captured by the monopolist as profit. Producer surplus will be equal to area (a+b+c+d+e)
400
Zeb’s
Lower Prices Same Prices
Art’s Lower Prices $300 ;$500 $200 ;$600
Same Prices $100 ;$700 $400 ;$800
Each restaurant independently and simultaneously chooses its action and has complete information of the payoff matrix. Based on the information, does either firm have a dominant strategy?
What is The dominant strategy for Zeb’s is to charge the same prices.
Independent of Art’s choice, the profit for Zeb’s is always greatest when Zeb’s charges the same price.
400
Monopolistically competitive firms are inefficient because they
what is produce a lower level of output at a higher average cost than do perfectly competitive firms
400
Based on the information in the graph above, what are the profit-maximizing output quantities for a single-price monopolist and for a monopolist that engages in perfect price discrimination?
What is For a single-price monopolist, Q0. With perfect price discrimination, Q3.
Profit maximization requires the firm to produce where marginal revenue equals marginal cost. For a single-price monopoly, marginal revenue is less than the price. In the graph above, the single-price profit-maximizing firm would produce at Q0. For a firm that can perfectly price discriminate, the marginal revenue curve and the demand curve are the same curve. Therefore, if the profit-maximizing firm could perfectly price discriminate, it would produce Q3.
400
why are imperfectly competitive markets are inefficient?
what is Price is greater than marginal cost.
Imperfectly competitive markets face a downward-sloping demand curve. Firms operating at the profit-maximizing output charge a price that is greater than marginal cost, unlike efficient firms that operate at the point where the marginal cost equals price. Any price other than where marginal cost equals price prevents mutually beneficial transactions from taking place and results in a reduction in total economic surplus relative to the competitive equilibrium.
500
The profit-maximizing firm depicted in the graph above should
what is exit if conditions do not improve in the long run
500
first entry in each cell representing the payoff to Bmine and the second representing the payoff to Gmine.
What is dominant strategy of each firm?
What is Gmine's dominant strategy is to not cheat; Bmine's dominant strategy is to cheat.
500
In the long run, a monopolistically competitive firm is allocatively inefficient because the firm will
what is charge a price greater than the marginal cost
500
The graph above shows the demand (DD), marginal revenue (MRMR), marginal cost (MCMC), and average total cost (ATCATC) curves for a monopoly. Based on the information in the graph provided, what is the profit-maximizing quantity for a monopolist that engages in perfect price discrimination?
What is Q3
Q3is where P (demand line) is equal to MC. This is where the firm is allocatively efficient and practicing perfect price discrimination. With perfect price discrimination, a monopolist produces the quantity where price equals marginal cost (just as a competitive market would) but extracts all economic surplus associated with its product and eliminates all deadweight loss.
500
in imperfectly competitive markets what must firms do to sell additional products?
what is Firms must lower their product prices to sell additional units.
Firms in an imperfectly competitive market face a downward-sloping demand curve. Therefore, to sell a larger quantity, firms must reduce their prices on all the units they sell.