Suppose that the inverse market demand for pounds of cranberries is given by P= $12-0.05Q. Pounds...

 

Transcribed Image Text:

Suppose that the inverse market demand for pounds of cranberries is given by P= $12-0.05Q. Pounds of cranberries can be grown by anybody at a constant marginal cost of $1. 9. a. If there are lots of cranberry growers in town so that the cranberry industry is competitive, how many pounds of cranberries will be sold, and what price will they sell for? b. Suppose that a drought wipes out the cranberries of all but two producers, Mateo and Zuri. Both Mateo and Zuri have produced bumper crops and have more than enough cranberries available to satisfy the demand at even a zero price. If Mateo and Zuri collude to generate monopoly profit, how many pounds of cranberries will they sell, and what price will they sell for? C. Suppose that the predominant form of competition in the cranberry industry is price competition. In other words, suppose that Mateo and Zuri are Bertrand competitors. What will be the final price of a pound of cranberries be in this market - in other words, what is the Bertrand equilibrium price? d. At the Bertrand equilibrium price, what will be the final quantity of pounds of cranberries sold by both Mateo and Zuri individually, and for the industry as a whole? How profitable will Mateo and Zuri be? e. Would the results you found in parts (c) and (d) be likely to hold if Mateo let it be known that his cranberries were the juiciest in town, and Zuri let it be known that hers were the tastiest? Explain. f. Would the results you found in parts (c) and (d) hold if Mateo could grow cranberries at a marginal cost of $0.95? Suppose that the inverse market demand for pounds of cranberries is given by P= $12-0.05Q. Pounds of cranberries can be grown by anybody at a constant marginal cost of $1. 9. a. If there are lots of cranberry growers in town so that the cranberry industry is competitive, how many pounds of cranberries will be sold, and what price will they sell for? b. Suppose that a drought wipes out the cranberries of all but two producers, Mateo and Zuri. Both Mateo and Zuri have produced bumper crops and have more than enough cranberries available to satisfy the demand at even a zero price. If Mateo and Zuri collude to generate monopoly profit, how many pounds of cranberries will they sell, and what price will they sell for? C. Suppose that the predominant form of competition in the cranberry industry is price competition. In other words, suppose that Mateo and Zuri are Bertrand competitors. What will be the final price of a pound of cranberries be in this market - in other words, what is the Bertrand equilibrium price? d. At the Bertrand equilibrium price, what will be the final quantity of pounds of cranberries sold by both Mateo and Zuri individually, and for the industry as a whole? How profitable will Mateo and Zuri be? e. Would the results you found in parts (c) and (d) be likely to hold if Mateo let it be known that his cranberries were the juiciest in town, and Zuri let it be known that hers were the tastiest? Explain. f. Would the results you found in parts (c) and (d) hold if Mateo could grow cranberries at a marginal cost of $0.95?

Answer rating: 100% (QA)

a P 12005Q TR PQ TR 12Q 00... View the full answer