iv. Draw a graph to illustrate the problem.
(b) Assume instead that the monopolist has a cost structure where the total costs are
described by:
C(Q) = 0.25Q2 5Q + 300
What output level will the monopolist choose in order to maximize prots? What
is the pri
(b) Determine the optimal quantity that the rm should produce in order to attain
the objective specied in a.
(c) At what price should the monopolist sell his product?
(d) What is the monopolists prot?
(e) Compute the deadweight loss of the monopoly.
(f) D
Quiztypequestions
1.
Foramonopoly,marginalrevenueis_thanthepriceofthegood,andthe
marginalrevenuecurvelies_thedemandcurve.
a.
less;below
b.
greater;above
c.
less;above
d.
greater;below
2.WhichofthefollowingisNOTacharacteristicofamonopoly?
a.
Thereisonlyone
Firm Strategies Product Differentiation Class 14
Firms Strategies
Product differentiation Variety
Product differentiation Quality
Advertising
Price Discrimination
Mergers
Vertical Relations
Entry and Exit
Research and Development
Innovation and P
E385 - The Economics of Industry
Practice Exercises II
Filomena Garcia - garcia@indiana.edu
1. Consider a Stackelberg duopoly for a homogenous product with demand Q = 25 p2 .
Each rms cost function is identical and given by C = 10 + q.
(a) Determine the v
E385 - The Economics of Industry
Problem Set 3 - Part I
Filomena Garcia - figarcia@indiana.edu
Due date: 03/12/2013
1. Suppose that the demand for tickets to the symphony for adults is
PA = 100 qA and the demand for children is PC = 50 2qC . The unit
cost
E385 - The Economics of Industry
Practice Exercises II
Filomena Garcia - garcia@indiana.edu
1. Consider a Stackelberg duopoly for a homogenous product with demand Q = 25 p2 .
Each rms cost function is identical and given by C = 10 + q (1 + q).
(a) Determi
E385 - The Economics of Industry
Problem Set 1
Filomena Garcia - figarcia@indiana.edu
Part A
1. Assume that the production of milk is a perfectly competitive industry. The market
demand for milk is described by Q = 6000
50p
. There are 50 producers of mi
E385 - The Economics of Industry
Practice Exercises IV
Filomena Garcia - garcia@indiana.edu
1. Consider the model of vertically dierentiated product. Two rms sell products of
dierent qualities, u and u, where u > u. The willingness to pay of a consumer of
E385 - The Economics of Industry
Practice Exercises IV
Filomena Garcia - garcia@indiana.edu
1. Consider the model of vertically dierentiated product. Two rms sell products of
dierent qualities, u and u, where u > u. The willingness to pay of a consumer of
Economics of Industry
ECON 385
Problem Set 2
1. Consider the following situation. The gas distributer Dot, is the only gas
distributer in a certain town. This town is constituted by a road of 1 mile.
The distributer is located exactly in the middle of the
E385 - The Economics of Industry
Practice Exercises I
Filomena Garcia - garcia@indiana.edu
1. A monopolist faces a market demand curve given by: p = 70 Q.
(a) Suppose that the monopolists total cost is C(Q) = 6Q.
i. What output level will the monopolist c
E385 - The Economics of Industry
Practice Exercises I - Solutions
Filomena Garcia - garcia@indiana.edu
1. A monopolist faces a market demand curve given by: p = 70 Q.
(a) Suppose that the monopolists total cost is C(Q) = 6Q.
i. What output level will the
Drawer) _
Suppose Haf Al/yfv Mme GA m3 X Jar expireJ and a new 19mm LS
gammy e marLe+
9:1003Q
C(%L=WL / (exclarfblly.
C(9:)=IODF+300 cfw_zinr Follower. .
CM Hue qaamLhy 9? H16 cfw_WW-(EM, WWW GP on/bwer/ prtce, am! (Mr abfm
31>. SW6- QZQL+CbE ae can reU/r
Firm Strategies Mergers Class 10
Mergers
Horizontal mergers
Merger control in the US
Long tradition: Clayton Act from 1914
Mergers are forbidden if substantial lessening of competition
Current approach: Horizontal Merger Guidelines (1992)
Merger con
Imperfect Competition CLASS 8
Sequential choice - Stackelberg Model
Up to now firms took simultaneous decisions
Firms arent able to observe each others decision before
making their own.
Now: sequential decisions
Possibility for some firm(s) to act bef
3. Consider a duopoly for a homogenous product with demand p = 20 2Q. Each rms
cost function is given by C = 10 + q(q + 1). Determine the values of the Cournot
equilibrium.
4. Consider a market in which n > 1 rms compete la Cournot. The demand function
is
Each rm maximizes prots as:
pp
p
uu
2p p
= 0 1
=0
p
uu
uu p
p =
+
2
2
max = p 1
and
pp
p
uu
p 2p
= 0
=0
p
uu
p
p =
2
max = p
(b) Determine the equilibrium prots as a function of the quality dierence between
the rms. What equilibrium would you expect i
Given the quantity of the leader, we can obtain the quantity of the follower by
plugging it in (1)
49 2 49
49
F
4
q =
=
4
8
49 49
53
P = 50 2
+
=
8
4
4
49
53 49
10 +
4
4
4
53 49
49
=
10 +
4
8
8
L =
= 140.06
F
= 65.031
(b) Suppose now that the leader cho
E385 The Economics of Industry Instructor: Filomena Garcia Duration: 1:10 Name:
_ General
Directions: Seat according to the directions of the instructors. Leave coats and backpacks in the
front of the room. No bathroom breaks. No support material or calcu
E385 - The Economics of Industry
Problem Set 1
Due date: 09/24/2015 - to be handed in in class
Answer all questions in the provided sheets (back and front)
September 14, 2015
Part A
1. Assume that the production of milk is a perfectly competitive industry
Firm Strategies Product Differentiation Class 13
Quality Differentiation
Consumers are distributed in a line in an increasing
order of preference for quality.
In the vertical axis we have the willingness to pay of
consumers.
each consumer buys exactly
Firm Strategies Price Discrimination Class 18 and 19
Case. How to sell this book?
Case. How to sell this book?
Suppose its the only IO book
Suppose its the only IO book
on the market
on the market
Profits we can make depend on
Profits we can make dep
Firm Strategies Price Discrimination Class 20 and 21
Monopoly pricing with
two part tariffs
One way to discriminate based on quantity is by using Two-Part
Tariffs (TPT)
A Two-Part Tariff consists of:
A fixed fee charged for the right to buy the good F