Economics Model Answers Nine - 2013

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1. Identify an industry not mentioned in the lecture that is an oligopoly, and explain why.


2. Order the types of industries from those having the lowest price (due to the greatest competition) to those having the highest price (due to the least competition).


3. Explain which specific type of industry (e.g., oligopoly or something else) each of these quotes probably refers to: (1) "She's the finest hair stylist in town; no one has her special style!", (2) "Crazy Eddie ... his low prices are INSANE!", (3) "Don't like his prices? He's the only one in town selling what you need."


4. List how monopolies can be established.


5. What prevents a monopoly from increasing its prices without limitation? Explain.


Honors

Answer question 6, and then 2 out of the subsequent 3 questions:

6. Where is the Nash equilibrium for this set of options, where (x,y) represents the profits to (Firm A, Firm B)? Explain.



Firm A Does Not Reduce Output Firm A Reduces Output
Firm B Does Not Reduce Output (50,50) (100,25)
Firm B Reduces Output (25,100) (75,75)


7. Monopolies: should the government regulate them? Or is regulation worse?


8. Does the "deadweight loss" equal the "consumer surplus"? Explain the relationship.


9. How does a monopolist maximize his profits?

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