Principles of Economics 103 Second Problem Set
Professor Coolidge Spring, 2008
9 pts. 1. Caitlin must decide how much to spend on books, ice cream, and workouts at the gym. The price of books at her favorite thrift store is $1 each, ice costs her $
An Extended Duopoly Game
John C. Eckalbar
Abstract: The author shows how principles and intermediate economic students
can gain a feel for strategic price setting by playing a relatively large oligopoly
game. The author constructs a playoff matrix and dis
Chapter 7, Cost Curves
Weve taken D & S about as far as we can. To get more insight, we need more tools. Heres the
sort of thing we are interested in:
1. Do the firms make a profit?
2. What happens in the long run?
3. What if the market is n
For many practical problems, it matters a lot just how responsive buyers are to changes in P.
Examples from class: effect of tuition increase on enrollment, effect of oil supply interruption on
price of oil.
When you look at the g
Firms in an oligopoly cannot maximize their profits by following simple rules, such as
marginal revenue equals marginal cost. Instead, they are forced to think strategically. When they
contemplate an action, such as a pr
May 24, 2004
Another Year at the Federal Trough: Farm Subsidies for
the Rich, Famous, and Elected Jumped Again in 2002
Brian M. Riedl
Taxpayers funding Washingtons $20,000-perhousehold budget have long known they are not getting their moneys wort
Beginning Bundling Theory
Bundling is the selling of two or more goods as a packaged unit. There are lots of examples:
Operating systems are bundled with web browsers. Word processing programs with spreadsheets.
Hardware with software. Hardw
The Temptation to Price Discriminate
Consider the monopolist shown below. If the same price must be charged to all buyers, then P0 is the best price.
But the temptation to price discriminate, i.e, to charge different pri
A monopolist's demand curve is given in the top graph, and the raw data for the curve is given in Table 1. Fill in the values of TR in Table 1. The values for TC are also given in Table 1. Use what you have at this point to find the profits at all le
In the lower of the above graphs, draw MC and ATC. Make an effort to locate the curves at the appropriate heights. (Hint: The curves in the lower graph come from slopes. You can estimate a slope by laying a ruler down in the upper graph and estimatin
John Merritt Howard
Chapter 2 Terms
Scientific method the name for the ongoing process that economists use to (1) develop models of the
world and (2) test those models with data
Model simplified description, or representation, of the world. Sometimes, eco