Econ 100A PS5 - Department of Economics University of...

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Econ 100A-Spring 2010 Page 1 Problem Set 5 Department of Economics Spring 2010 University of California Prof. Woroch Economics 100A PROBLEM SET 5 Due: Thursday, April 29 th , 2010, 2:00 PM (in lecture) I. TRUE or FALSE or UNCERTAIN and EXPLAIN : For each statement below, decide whether it is true or false or cannot be determined, and explain the reasoning behind your answer in a few sentences. Supply any assumptions you feel are needed to come to your conclusion. 1. According to the Stackelberg model, the dominant firm allows the follower to produce a positive amount because it is not possible to completely exclude him from the market. 2. When two duopolists compete by setting price for their products, then the industry will result in the Bertrand paradox. 3. Concerned with the waste associated with product proliferation, the government could reduce the number of brands in a monopolistically competitive industry by placing a lump-sum tax on each firm. 4. If firms in the competitive fringe have higher cost than the dominant firm, it makes sense for the dominant to set price so as to drive all the fringe firms from the market. 5. The higher the interest rate, the easier it is for firms in the same industry to sustain a collusive outcome, all else equal. 6. Your neighbor’s party has gone on too long and the music is way too loud for your taste. When you bang on their door and threaten to call the police, you are effectively applying a Coasian solution to the externality caused by your neighbor. 7.
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This note was uploaded on 07/15/2010 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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Econ 100A PS5 - Department of Economics University of...

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