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What is Mrs. Smith's budget constraint in this situation? Graph the four different budget constraints and sketch in Mrs. Smith's utility-maximizing choices.
How would those results be affected if consumers were reluctant to shift purchases from one firm What other assumptions are crucial for the Bertrand Paradox?
In which of these cases are capacity constraints important, so that the two-stage model of capacity investment and price competition might apply?
Suppose that the market for hula hoops is monopolized by a single firm. Draw the initial equilibrium for such a market.
Compute the profit-maximizing price-quantity combination for the firm. What are the firm's profits?
Calculate the profit-maximizing price-quantity combination for the monopolist. Also calculate the monopolist's profits and consumer surplus.
What is a natural monopoly? Why does electric power distribution or local telephone service have the characteristics of a natural monopoly?
Describe some of the transactions costs that must be present if a monopoly is to be able to practice price discrimination successfully.
How would you analyze the tax incidence question-that is, how would you show which economic actor pays most of the tax?
Why are barriers to entry crucial to the success of a monopoly firm? Explain why all monopoly profits will show up as returns to the factor or factors.
What kind of rule would a monopoly follow if it wished to choose a profit-maximizing price? Why not charge the highest price possible?
What mutually beneficial trading opportunities remain, and what are the potential utility levels for Smith and Jones?
What will the money wage rate be in this model? What will the nominal prices of X and Y be? How will your answers to part a change?
Why would such a change not cause any substitution effects for these firms' input demand? What would determine the size of these effects?
Explain how the profit-maximizing assumption is used in explaining the direction of each of these effects.
Solve for the mixed-strategy Nash equilibrium of this game. Compare the results from the mixed-strategy Nash equilibrium to the Bertrand Paradox.
Return to the example used in the text for the Cournot model, where demand was equal to our not. Compute the Nash equilibrium quantities, prices, and profits.
Describe a hypothetical situation under which each strategy might work for an incumbent monopolist.
Consider the market for high-definition televisions, which can be expected to grow in popularity over time. What determines which firm will move first?
Why is subgame-perfect equilibrium a useful equilibrium concept? What sort of crazy Nash equilibria might be ruled out?
With the price, why are profits maximized even though they are zero? Does this zero-profit solution imply that the firm's owners are starving?
Describe what the demand facing the firm would be like if one of the conditions held but not the other.
Why should a firm be concerned about the opportunity costs of the people who invest in it when those costs never enter into its accounting statements?
Why short-run total costs must be equal to or greater than long-run total costs for any given output level?
Calculate Late Bloomer's quiz average for each week of the semester. Why, after the first week, is his average always lower than his current week's quiz?