{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Tutorial 5 (Week 7) - EC1301 10/11 Semester 1 EC1301...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
EC1301 10/11 Semester 1 1 EC1301 Tutorial Discussion 5 (Week 7) 1. Consider the market for air travel between Singapore and Penang. The long-run average cost is constant at $200 per passenger, and the demand curve is linear, with a slope of -$1 per passenger. A secure monopolist would charge a price of $280 and serve 70 passengers per day. The other possible prices are $260 for an insecure monopolist, $250 for the duopoly outcome, and $170 for the case in which one airline picks a large quantity and a low price but a second airline enters anyway. a. Describe the game using a diagram and a game tree [first one like Figure 13.7 (page 38 in lecture slide) and the second one like Figure 13.8 (page 41 in lecture slide) in your text] b. Use your second figure to predict the outcome of the entry deterrence game. What is the price of air travel? 2. Your firm sells a very popular children’s toy. The manager of another firm is thinking about introducing a similar toy. Your average cost of production is constant at $2 per toy. At the current monopoly price of $5 per toy, you sell 120 toys per day. You
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern