Answers for ECO Problem Set 3
Answers for ECO Problem Set 3 ECO 150
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This 0 page Study Guide was uploaded by Ashli Rutledge on Tuesday November 17, 2015. The Study Guide belongs to ECO 150 at Central Michigan University taught by Udayanganie, A in Summer 2015. Since its upload, it has received 29 views. For similar materials see Current Economic Problems in Economcs at Central Michigan University.
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Date Created: 11/17/15
Problem Set 3 Eco 150 1 i Price discrimination the existence of price differences across customers for the same good that are not due to differences in the marginal costs of supplying the customers The objective of price discrimination is higher pro ts for the rm that engages in it ii Three conditions required in price discrimination 1 the rm must be a price searcher it must able to raise the price above marginal cost without losing all of its sales to rivals 2 There must be identi able differences across customers in their willingness or ability to pay different prices for the same good 3 The rm must be able to prevent customers who pay lower prices from reselling the good to customers who otherwise would be charge higher prices or else customers eligible for the lowest price will buy on behalf of all customers 2 How do we calculate HHI Add the square of the market shares exampe 52 42 72 90 Between 1000 1800 is a quotmoderately competitivequot market Greater than 1800 is quothighly concentratedquot market Under 1000 is considered a competitive market i highly concentrated breakfast cereals computers and peripherals ii moderately concentrated automobile manufacturing iii competitive market clothing furniture ice cream wine 3 a Four rm concentration ratio of 60 Means that the largest four rms are 60 of the market sales 90 Means that the largest four rms are 90 of the market sales b Sales for Industry A 352252 202 102102 2450 Sales for Industry B 552202152 5252 3700 Both industries competitiveness is highly concentrated 4 i Three Policy Responses Assigning property rights Command amp control and marketbased Tradable pollution rights ii Coase Theorem book answer markets with externalities can be made to be ef cient Prof Uday answer If there are no costs of bargaining between people and polluters then by assigning a property right either the right of the rm to pollute or the right of people to be free from pollution people and rms can negotiate to the correct level of production Why Coase theorem makes sense It makes sense if the victim and polluter both agree on the same terms Negotiating a single price for them to pay It doesn t put blame on person but both take ownership 5 i this answer should be in your own words I say that my friend is incorrect about there not being any physical or economic supply change of a nonrenewable source There can absolutely be a change in both The physical supply could go down because these nonrenewable sources are not manmade They are found onin Earth s natural grounds Economic supply most de nitely changes because if there is a low amount the price will go up If there is a high supply the price varies The price depends on the market of the nonrenewable price as well ii Calculating expected life time of nonrenewable resource changes Static Reserve Index Economic reserves AnnuaConsump on ExpecmdrewurceLHeHme iii Reason for increase in life time of nonrenewable resource Discovering more of the resources on other parts of the Earth can increase the time of how long nonrenewable resources stay around
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