《微经》课后练习英文答案第十七章.docx

《微经》课后练习英文答案第十七章.docx

《《微经》课后练习英文答案第十七章.docx》由会员分享，可在线阅读，更多相关《《微经》课后练习英文答案第十七章.docx（24页珍藏版）》请在冰豆网上搜索。

《微经》课后练习英文答案第十七章

17

Chapter16

Oligopoly

OLIGOPOLY

WHAT’SNEWINTHESIXTHEDITION:

ThereisanewIntheNewsboxon”TheNextBigAntitrustTarget?

”

LEARNINGOBJECTIVES:

Bytheendofthischapter,studentsshouldunderstand:

Øwhatoutcomesarepossiblewhenamarketisanoligopoly.

Øtheprisoners’dilemmaandhowitappliestooligopolyandotherissues.

Øhowtheantitrustlawstrytofostercompetitioninoligopolisticmarkets.

CONTEXTANDPURPOSE:

Chapter17isthefinalchapterinafive-chaptersequencedealingwithfirmbehaviorandtheorganizationofindustry.Chapters14and15discussedthetwoextremeformsofmarketstructure—competitionandmonopoly.Themarketstructurethatliesbetweencompetitionandmonopolyisknownasimperfectcompetition.Therearetwotypesofimperfectcompetition—monopolisticcompetition,whichweaddressedinthepreviouschapter,andoligopoly,whichisthetopicofthecurrentchapter.

ThepurposeofChapter17istoaddressoligopoly—amarketstructureinwhichonlyafewsellersoffersimilaroridenticalproducts.Becausethereareonlyafewsellersinanoligopolisticmarket,oligopolisticfirmsareinterdependentwhereascompetitivefirmsarenot.Thatis,inacompetitivemarket,thedecisionsofonefirmhavenoimpactontheotherfirmsinthemarketwhileinanoligopolisticmarket,thedecisionsofanyonefirmmayaffectthepricingandproductiondecisionsoftheotherfirmsinthemarket.

KEYPOINTS:

∙Oligopolistsmaximizetheirtotalprofitsbyformingacartelandactinglikeamonopolist.Yet,ifoligopolistsmakedecisionsaboutproductionlevelsindividually,theresultisagreaterquantityandalowerpricethanunderthemonopolyoutcome.Thelargerthenumberoffirmsintheoligopoly,thecloserthequantityandpricewillbetothelevelsthatwouldprevailunderperfectcompetition.

∙Theprisoners’dilemmashowsthatself-interestcanpreventpeoplefrommaintainingcooperation,evenwhencooperationisintheirmutualinterest.Thelogicoftheprisoners’dilemmaappliesinmanysituationsincludingarmsraces,advertising,common-resourceproblems,andoligopolies.

∙Policymakersusetheantitrustlawstopreventoligopoliesfromengaginginbehaviorthatreducescompetition.Theapplicationoftheselawscanbecontroversial,becausesomebehaviorthatmayseemtoreducecompetitionmayinfacthavelegitimatebusinesspurposes.

CHAPTEROUTLINE:

I.Definitionofoligopoly:

amarketstructureinwhichonlyafewsellersoffersimilaroridenticalproducts.

II.Definitionofgametheory:

thestudyofhowpeoplebehaveinstrategicsituations.

A.Bystrategic,wemeanasituationinwhicheachperson,indecidingwhatactionstotake,mustconsiderhowothersmightrespondtothataction.

B.Eachfirminanoligopolymustactstrategically,becauseitsprofitnotonlydependsonhowmuchoutputitproduces,butalsoonhowmuchotherfirmsproduceaswell.

III.MarketswithOnlyaFewSellers

A.Akeyfeatureofoligopolyisthetensionbetweencooperationandself-interest.

1.Thegroupofoligopolistsisbetteroffcooperatingandactinglikeamonopolist,producingasmallquantityofoutputandchargingapriceabovemarginalcost.

2.Yet,becausetheoligopolistcaresabouthisownprofit,thereisanincentivetoactonhisown.Thiswilllimittheabilityofthegrouptoactasamonopoly.

B.ADuopolyExample

1.Aduopolyisanoligopolywithonlytwomembers.

Usethisexampleandshowthecompetitiveequilibriumfirst.Then,showthemonopolypriceandoutput.Finally,explainhowthetwosupplierswouldendupproducingaquantitybetweenthecompetitiveandmonopolyoutputandchargingapricebetweenthecompetitivepriceandthemonopolyprice.

2.Example:

JackandJillowntheonlywaterwellsintown.Theyhavetodecidehowmuchwatertobringtotowntosell.（Assumethatthemarginalcostofpumpingeachgallonofwateriszero.）

3.Thedemandforthewaterisasfollows:

Quantity（gallons）

Price

TotalRevenue（andTotalProfit）

0

$120

$0

10

110

1,100

20

100

2,000

30

90

2,700

40

80

3,200

50

70

3,500

60

60

3,600

70

50

3,500

80

40

3,200

90

30

2,700

100

20

2,000

110

10

1,100

120

0

0

C.Competition,Monopolies,andCartels

1.Ifthemarketforwaterwereperfectlycompetitive,pricewouldequalmarginalcost（$0）.Thismeansthat120gallonsofwaterwouldbesold.

2.Ifamonopolycontrolledthesupplyofwater,profitwouldbemaximizedatapriceof$60andanoutputof60gallons.

a.Notethatinthiscase,price（$60）exceedsmarginalcost（$0）.

b.Thislevelofoutputislowerthanthesociallyefficientlevelofoutput（120gallons）.

3.Theduopolistsmayagreetoacttogethertosetthepriceandquantityofwater.

a.Definitionofcollusion:

anagreementamongfirmsinamarketaboutquantitiestoproduceorpricestocharge.

b.Definitionofcartel:

agroupoffirmsactinginunison.

c.IfJillandJackdidcollude,theywouldagreeonthemonopolyoutcomeof60gallonsandapriceof$60.

d.Thecartelmustalsodecidehowtosplittheproductionofwater.Eachmemberwillwantalargersharebecausethatmeansmoreprofit.

TheInformant!

Chapter11（47:

00-53:

50）.MattDamonplaysMarkWhitacreinthemoviechroniclingtheprice-fixingscandalatArcherDanielsMidland（ADM）.ThisclipshowsWhitacremeetingwithotherexecutivesfromthelysineindustrytosetanagreementtolimitproductionandkeepthepriceoflysinehigh.

4.IntheNews:

PublicPriceFixing

a.Firmsthatmeetinsecrettosetpricesruntheriskofprosecution.

b.ThisisanarticlefromTheWallStreetJournalsuggestingthatfirmsmaycolludebypubliclypostingprices.

D.TheEquilibriumforanOligopoly

1.Itisoftendifficultforoligopoliestoformcartels.

a.Antitrustlawsprohibitagreementsamongfirms.

b.Squabblingamongcartelmembersovertheirsharesisalsolikelytooccur.

2.Intheabsenceofabindingagreement,themonopolyoutcomeisunlikely.

3.AssumethatJackexpectsJilltoproduce30gallonsofwater（halfofthemonopolyoutcome）.

a.Jackcouldalsoproduce30gallonsandearnaprofitof$1,800.

b.However,hecouldproduce40gallonsandearnaprofitof$2,000.

c.Jackwillwanttoproduce40gallons.

4.Jillmightreasonthesameway.IfsheexpectsJacktoproduce30gallons,shecouldincreaseherprofitsbyraisingheroutputto40gallons.

5.Ifduopolistspursuetheirownself-interestwhendecidinghowmuchtoproduce,theyproduceaquantitygreaterthanthemonopolyquantity,chargeapricelowerthanthemonopolyprice,andearntotalprofitlessthanthemonopolyprofit.

6.DefinitionofNashequilibrium:

asituationinwhicheconomicactorsinteractingwithoneanothereachchoosetheirbeststrategygiventhestrategiesthatalltheotheractorshavechosen.

7.Inthisexample,theNashequilibriumoccurswhenbothJackandJillareproducing40gallons.

a.GiventhatJackexpectsJilltoproduce40gallons,hewillnotbebetteroffatanyotheroutputlevelthan40gallons.

b.GiventhatJillexpectsJacktoproduce40gallons,shewillnotbebetteroffatanyotheroutputlevelthan40gallons.

8.Notethattheoligopolistscouldearnahighertotalprofitiftheycooperatedwithoneanother,butinsteadpursuetheirownself-interestandearnalowerlevelofprofit.

9.Whenfirmsinanoligopolyindividuallychooseproductiontomaximizeprofit,theyendupsomewherebetweenperfectcompetitionandmonopoly.

a.Thequantityofoutputproducedbytheoligopolyisgreaterthanthelevelproducedbyamonopolybutlessthanthelevelproducedbyacompetitivemarket.

b.Theoligopolypriceislessthanthemonopolypricebutgreaterthanthecompetitiveprice（whichimpliesthatitisgreaterthanmarginalcost）.

ABeautifulMind,Chapter5.RussellCroweplaysJohnNashinthismoviebasedlooselyonNash’slife.Inthisscene,Nashisatabarwithfriendsandhasanideaaboutself-interestandgeneralequilibrium.ThesceneisnotperfectandactuallymisstatesthedefinitionofaNashequilibrium.Thisoffersyouachancetoseeifstudentscanidentifytheerror.

E.HowtheSizeofanOligopolyAffectstheMarketOutcome

YoumightwanttopointoutthattheNashequilibriumwillbe（n/n+1）ofthecompetitiveoutput.Therefore,withtwosuppliers,thejointoutput（80units）willbetwo-thirdsofthecompetitiveequilibrium（120units）.Thiswillhelptoexplainthatasthenumberoffirmsinanoligopolymarketincreases,themarketoutputquicklyapproachesthecompetitiveoutcome.

1.Whenanoligopolistdecidestoincreaseoutput,twothingsoccur.

a.Becausepriceisgreaterthanmarginalcost,increasingoutputwillincreaseprofit.Thisistheoutputeffect.

b.Becauseincreasingoutputwillraisethetotalquantitysold,thepricewillfallandwillthereforelowerprofit.Thisisthepriceeffect.

2.Thelargerthenumberofsellersintheindustry,thelessconcernedeachsellerisaboutitsownimpactonmarketprice.

3.Thus,asthenumberofsellersinanoligopolygrowslarger,anoligopolisticmarketlooksmoreandmorelikeacompetitivemarket.

a.Pricewillapproachmarginalcost.

b.Thequantityofoutputproducedwillapproachthesociallyefficientlevel.

Activity1—FourMarketsforWidgets

Type:

In-classdemonstration

Topics:

Marketstructureandprice

Materialsneeded:

Sevenvolunteers,money（$2.50to$4.00）

Time:

15minutes

Classlimitations:

Worksinanyclasswithmorethan15students

Purpose

Thisillustrateshowdifferentmarketstructurescanresultinwidedifferencesinpricefortheconsumer.Italsoshowshowcommunicationcanincreaseoligopolyprofits.Theopportunitytowinrealmoneycreatesgre