2021 applied economics(sbi2005 )lecture notes week10 PDF

Preview

Summary

Lecture notes on week 10...

Description

Chapter 10 and chapter 11 Chapter 10 Discussion Questions b. c. Demand is perfectly elastic; MR is constant and equal to P; AR always equals P d. true because when output increases by 1 unit, total revenue increases by $2. 3. b. Tr exceeds TC as much as possible 5. d. loss; shut down Problems 4. Chapter 11 Pages 226-227 Discussion Questions 5. Too little The supply of cashews will increase and the price of cashews will decrease. Problem 1. 1 Yes, 5 percent Entry economic profit: 6 percent Chapter 12 Discussion Questions: 7 7. make it much more difficult to maintain the differing prices. Review Questions: 3, 6 3. Doc 6. b. It yields a normal profit Problems: 1, 2 1. Doc 2. Doc

http://www.sfu.ca/~schwindt/econ103/june23.pdf

Chapter 13 Discussion Questions: 4, 5 4. I tdependsonhowmuc hc ons umer sv al uequal i t yands er v i ce ,andar ewi l l i ngt opay i cecompet i t i oni soneofmanywayst hata f ori tt hr oughhi gherpr oduc tpr i ces .Pr

pr oductorser vi cecancompet ei nt hemar k et pl acewi t hconsumer schoosi ng affor dabi l i t yov erqual i t y .Consumer smak epur c hasesmos t l yont hebasi sof whi chi scheaper . Compet i t i v epr i ci ngi susedmor ebybusi nes sessel l i ngsi mi l arpr oduct s ,s i nce ser vi cesc anv ar yf r om bus i nesst obusi ness ,whi l et heat t r i but esofapr oduct r emai nsi mi l ar . monopol i st i cal l ycompet i t i v efi r mspr ef ernonpr i cecompet i t i onbecauset hey donotwantconsumer st ochooseaffor dabi l i t yov erqual i t ywhi chi susual l y mor eex pens i v e. 5. a. economic profits might be diminished, but there will be productive efficiency. b. true since P > MC, but the availability of close substitutes pushes the price of the average firm down until it equals ATC. Review Questions: 1 1. 1,000 Problems: 1 1. a. The four-firm concentration ratio is found by adding together the percentage of sales for the top four firms. For the values above, the four-firm concentration ratio equals 85% (= 27% + 25% + 21% + 12%). b. The Herfindahl index is found by squaring the percentages for all of the firms in the industry (not the decimal form) and then adding these values together. For the values above, the Herfindahl index equals 2,032 (= 272 + 252 + 212 + 122 + 82 + 52 + 22). c. If the top three sellers combine to form a single firm, this combined firm will control 73% of the market (= 27% + 25% + 21%). Thus, we now have five firms in the industry whose respective shares of the local hamburger market are now 73%, 12%, 8%, 5%, and 2%. The new four-firm concentration ratio is 98% (= 73% + 12% + 8% + 5%). The new Herfindahl index is 5,566 (= 732 + 122 + 82 + 52 + 22). Chapter 14 Pages 281-282 Discussion Questions: 2, 4 2. : A four-firm concentration ration of 60 % means the largest four firms in an industry account for 60 % of sales; a four-firm concentration ratio of 90 % means the largest four firms account

for 90 percent of sales. Shortcomings: (1) they pertain to the whole nation, though relevant markets may be localized; (2) they do not account for inter-industry competition; (3) the data are for Canadian products, not imports; and (4) they don’t reveal the dispersion of size among the top four firms 4. Thek i nk eddemandc ur v ef acedbyol i gopol i esr es t sont heas s umpt i onst hat ( 1)Ri v al swi l l mat chpr i c ec ut s .( 2)Ri v al swi l l i gnor epr i c ei nc r eas es . Ri v al fir mswi l l mat c hpr i c ec ut sbuthol dt hei rpr i cesl owagai ns tot herfir ms ’ pr i ce i nc r eas es . Review Questions: 3, 5 3. c. pure monopolist 5. • Oligopolies may engage in limit pricing to keep out potential entrants. • Oligopolistic industries may promote technological progress. • Oligopolies can be kept in line by foreign competition...