Managerial Econmics Brickley, Smith, Zimmerman Chapter 6 Answers

Managerial Economics and Organizational Architecture

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Chapter 06 - Market Structure CHAPTER 6 MARKET STRUCTURE CHAPTER SUMMARY This chapter presents an economic analysis of market structure. It starts with perfect competition as a benchmark. Potential barriers to entry, that might limit competition, are examined. Subsequently, the chapter analyzes monopoly, monopolistic competition, and oligopoly. The chapter provides a brief introduction to elementary game theory. (Chapter 9 provides a more comprehensive treatment of game theory.) CHAPTER OUTLINE M ARKETS C OMPETITIVE M ARKETS Firm Supply Short-Run Supply Decisions Long-Run Supply Decisions Competitive Equilibrium Strategic Considerations Managerial Application: Entry in Low Carb Food Superior Firms Academic Application: Phantom Freight B ARRIERS TO E NTRY Incumbent Reactions Specific Assets Scale Economies Reputation Effects Excess Capacity Historical Application: Excess Capacity at ALCOA Managerial Application: Entry in Consumer Electronics Incumbent Advantages Precommitment Contracts Licenses and Patents Learning-Curve Effects Pioneering Brand Advantages Exit Costs Managerial Application: Government Restrictions on Exit M ONOPOLY Profit Maximization Unexploited Gains from Trade 6-1
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Chapter 06 - Market Structure M ONOPOLISTIC C OMPETITION Managerial Application: Monopolistic Competition in Golf Balls O LIGOPOLY Nash Equilibrium Output Competition Price Competition Managerial Application: Price Wars Empirical Evidence Cooperation and the Prisoners’ Dilemma Prisoners’ Dilemma Cartels Managerial Application: Collusion in the Lysine Industry S UMMARY TEACHING THE CHAPTER Chapter 6 focuses on market structure, a concept that students must understand so they can properly assess the business environment, which is an important component of the analysis presented in later chapters of the text. There are several key concepts in this chapter that will be referred to throughout the book. Most of the material in this chapter is likely to be review, so instructors can determine the appropriate mix of class discussion and problem solving that is needed for their students and the goals of the course. The basics of game theory are presented in this chapter using the prisoner’s dilemma. The Self-Evaluation Problems are graphical and quantitative in nature, serving as a good review of the tools presented in the chapter. The Review Questions provide a good review of the characteristics of market structure and other main concepts in the chapter. There are several questions that provide additional review of the quantitative and analytical concepts presented in the chapter and a few questions that review the concept of a Nash Equilibrium, which is covered more fully in Chapter 9. There are three
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Managerial Econmics Brickley, Smith, Zimmerman Chapter 6 Answers

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