Oligopoly and Match Price

After reading this chapter, you should know 1. The unique characteristics of oligopoly. 2. How oligopolies maximize profits. 3. How interdependency affects oligopolists pricing finiss. Problems for Chapter 10 1. Suppose the automobile market in the U. S. is multifariousness integrity as follows General Motors28% Ford23% Toyota18% Daimler-Chrysler16% All former(a)s15% a) What is the four unwaveringly concent balancen ratio? b) What is the approximate Herfindahl-Hirschman Index? 2.Assume an oligopolist confronts two possible demand curves for its own output, as illustrated below. The first (A) prevails if other oligopolists dont match price changes. The spot (B) prevails if rivals do match price changes. expense ($) $10 9 8 7 6 5 4Demand A 3 2 1Demand B 02468101214 Quantity (units per period) a) By how much does quantity demanded change if price is decrease from $10 to $4 and i) Rivals match price cut? ii) Rivals dont match price cut? b) By how much does quantity demanded chang e if price is raised from $4 to $9 and ) Rivals match price acclivity? ii) Rivals dont match price hike? 3. Suppose the following(a) schedule summarizes the sales situation confronting an oligopolist in the beverage industry Price (per unit) $0. 30 $0. 40 $0. 50 $0. 60 $0. 70 $0. 80 $0. 90 Quantity demanded per period (in millions) 10 9 8 7 6 5 4 Using the graph below, a) Draw the demand and fringy revenue curves facing this firm. b) Identify the profit-maximizing rate of output in a situation where marginal cost is constant at $0. 0 a unit. $ 1. 00 0. 90 0. 80 0. 70 0. 60 0. 50 0. 40 0. 30 0. 20 0. 10 012345678910 (Quantity in millions) 4. Suppose Nike and Adidas spend grand sums of money every year to promote their athletic wear, hoping to steal customers from from individually one other. Furthermore, assume each year they have to decide whether or non they should spend more money on advertising. If neither firm crowds, each of them will spend a penny $5 million. If bo th advertise, each will earn $2 million in profit.If one firm advertises and the other does non, the firm with the promotions will earn a profit of $3 million and the other firm will earn a mere $0. 5 million. role a payoff matrix to present this problem. 5. For the problem above a) If the fortune of an Adidas decision to advertise is 90 percent, what is the expected payoff to Nikes decision to advertise? b) If the probability of Adidas not advertising even though Nike does not is 20 percent, what is expected payoff to Nikes decision to not to advertise? c) What should Nike do?