EEP142 Final

EEP142 Final - EEP142 Final Prof Sofia Villas-Voas Fukumi...

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EEP142 Final Prof. Sofia Villas-Voas Fukumi Watanabe SID # 19744392 Part A 1. False Miss Young’s husband cannot raise the price because if he raises the price, new rivals may enter the market. Then he has to lower the price again to drive these new firms out. For the predation to be successful, potential entrants must believe that it does not pay to enter this business because of the Miss Young’s husband’s pricing behavior. In addition, he should try to gain control of the rivals’ assets or to see they are permanently withdrawn from the market. Otherwise, when he raises the price, another rival could use those assets or some other companies but the assets and compete. Only the he can raise the price to the monopoly level with no fear of inducing entry. 2. True The lemons problem addresses that where sellers have perfect information and consumers have extremely limited information, a market may not exist, or only the lowest-quality product may be sold. This problem certainly can occur to edible lemon market, if consumers cannot tell which lemons are high-quality or low-quality (imperfect information), but producers are able to tell them. And this is very likely in the real world edible lemon market.
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This note was uploaded on 11/16/2008 for the course ECON 142 taught by Professor Weber during the Spring '08 term at Berkeley.

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EEP142 Final - EEP142 Final Prof Sofia Villas-Voas Fukumi...

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