22 Jun Problem Set 4 is due by 11:59 p.m. (ET) on Fr
Problem Set 4 is due by 11:59 p.m. (ET) on Friday of Module/Week 8.
1. Monopolies can sometimes find themselves in difficult financial situations that lead to losses. Suppose Mr. Burns’ power company has a monopoly for providing electricity in Springfield. His costs of upkeep are so high that he is consistently losing money.
a.) Show this outcome in a completely labeled graph. Clearly identify all parts of your graph, including the best price and output for the firm as well as the losses.
Now, answer the following:
b.) What happens to the market output when Mr. Burns raises the price he charges?
c.) Will this stop his losses? Why or why not?
2. Assume the following game is played one time only. Based on the information in the payoff matrix below, PNC Bank and Citizens Bank are considering an implicit collusive agreement on interest rates. Payoffs to the two firms are represented in terms of profits in thousands of dollars.
Citizens Bank
Collude: Raise Rates Defect: Keep Rates Where They Are
PNC Collude: Raise Rates (900, 600) (700, 800)
Defect: Keep Rates Where They Are (1100, 300) (800, 400)
a.) Does PNC have a dominant strategy? What is it?
b.) Does Citizens have a dominant strategy? What is it?
c.) Does the result of your answer change if the game is played an infinite number of times? Why or why not? Properly use game theoretic terminology in your answer.
3. What is the profit-maximizing output of the monopolist shown below? ___________
What price do they set? _______________________
What is the monopolist’s markup over the competitive price? ________________
Why will this price not fall?
image1.wmf
10
20
30
40
50
0
2
4
6
8
10
Output per day
D
MC
MR
ATC
P
r
i
c
e
4. Levi’s has an advertising slogan: “Quality never goes out of style.” Consumers can buy other kinds of jeans, including off-brands. The manufacturers of off-brand, or generic, jeans do not advertise. Assume that the average total cost of producing Levi’s and generic jeans is the same.
a.) Create a graph showing the price (labeled as P1) that Levi’s changes. Also, identify the markup.
b.) How does Levi’s advertising affect their profits?
c.) Do Levi’s or the generic producers have a stronger incentive to maintain quality control? Why?
ORDER THIS PAPER NOW AND GET AN AMAZING DISCOUNT.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.