Davenport ECON625 Problem Set 5- graded - all correct

Asked by ecosmart
Dated: 16th Feb'17 06:04 PM
Bounty offered: $23.00

• Question 1

2 out of 2 points

Questions 1 through 5 refer to the scenario that follows. Suppose three firms face the same total market demand for their product. This demand is:

Suppose further that all three firms are selling their product for $60 and each has about one-third of the total market.

What is the amount of total revenue each firm receives, in dollars?

• Question 2

0 out of 2 points

Now assume that one of the firms, in an attempt to gain market share at the expense of the others, drops its price to $50. The other two quickly follow suit. What is the amount of total revenue each firm now receives, in dollars, rounded to the nearest dollar?

• Question 3

2 out of 2 points

What impact has the price drop had on the revenue of each firm?

• Question 4

2 out of 2 points

If the firms had all raised their prices to $70 instead of lowering price, what would be the amount of total revenue each firm would have received, in dollars, rounded to the nearest dollar?

• Question 5

0 out of 2 points

Would the firms have been better off raising the price to $70, lowering to $50, or making no change?

• Question 6

0 out of 2 points

Questions 6 through 10 refer to the following: A monopolistically competitive firm has the following short-run inverse demand, marginal revenue, and cost schedules for a particular product:

P = $45 – $0.2Q

MR = $45 – $0.4Q

TC = $500 + $5Q

MC = $5

What quantity would maximize profits for this firm? (Hint: Recall that profit maximizing is where MR = MC)

• Question 7

0 out of 2 points

Refer to question 6. At what price should this firm sell its product? Submit your answer as a whole number without the dollar sign.

• Question 8

2 out of 2 points

Refer to question 6. What would be the amount of the firm’s total revenue at the quantity and price identified in the prior two questions? Submit your answer as a whole number without a dollar sign.

• Question 9

0 out of 2 points

What would be the amount of the firm’s profit (positive number) or loss (negative number) at the quantity and price identified in questions 6 and 7? Submit your answer as a whole number without the dollar sign.

• Question 10

2 out of 2 points

What do you think would happen in this market in the long run?

• Question 11

0 out of 6 points

Questions 11 through 13 refer to the following: An amusement park, whose customer set is made up of two markets, adult and children, has developed demand schedules as follows:

The marginal operating cost of each unit of quantity is $5. (Hint: Because marginal cost is a constant, so is average variable cost. Ignore fixed cost.) The owners of the amusement park want to maximize profits. Calculate the price, quantity, and profit for each segment if the amusement park charges a different price in each market. (Hint: calculate profit at each price in the adult market, then in the child market, and choose profit maximizing in each. Using a spreadsheet would make this task manageable.) Enter amounts as whole numbers without dollar signs.

Adult market price (in dollars): [a]

Adult market quantity: [b]

Adult market profit (in dollars): [c]

Child market price (in dollars): [d]

Child market quantity: [e]

Child market profit (in dollars): [f]

Total profit (adult + child, in dollars): [g]

• Question 12

0 out of 3 points

Calculate the price, quantity, and profit if the amusement park charges the same price in the two markets combined. (Hint: Add adult and child quantities together, and treat this total and the entire market quantity at each price.)

Market price (in dollars): [a]

Quantity (child + adult at this price): [b]

Profit: [c]

• Question 13

0 out of 2 points

Is profit higher, lower, or the same when the market is split with different prices for adults and for children?

• Question 14

1 out of 1 points

Questions 14 through 18 refer to the following: Consider a small town that is served by two grocery stores, White and Gray. Each store must decide whether it will remain open on Sunday or whether it will close on that day. Monthly payoffs for each strategy pair are as shown in the table below.

Which firm is the most profitable in this market?

• Question 15

2 out of 2 points

Refer to question 14. What is White’s dominant strategy?

• Question 16

2 out of 2 points

Refer to Question 14. What is Gray’s dominant strategy?

• Question 17

2 out of 2 points

Refer to question 14. What will be the likely equilibrium outcome, assuming no additional information is available to either firm?

• Question 18

0 out of 2 points

Is the position identified in question 17 the best possible outcome for both firms?

Davenport ECON625 Problem Set 5
Answered by ecosmart
Expert Rating: 394 Ratings
Dated: 16th Feb'17 06:04 PM
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