1. Identify two products that have either fallen sharply in price or gotten sign
ID: 1095846 • Letter: 1
Question
1. Identify two products that have either fallen sharply in price or gotten significantly better without price increases. Explain why. 2. If an oligopolist knows rivals will match a price cut, would they ever reduce their price? 3. Dominos and Pizza Hut hold 66 percent of the delivered-pizza market. Should antitrust action be taken? 4. How would our consumption of cereal change if cereal manufactures stopped advertising? Would we be better off or worse off? 5. Why are people willing to pay more for Dreyer's ice cream when it has a Starbucks brand on it?
Explanation / Answer
Identify two products that have either (a) fallen sharply in price or (b) gotten significantly better without price increases. How did these changes come about?
Many possible answers including: contact lenses, prescription drugs, cell phones, VCRs. The changes occurred because of new technology and new competition in the production of these items.
If an oligopolist knows rivals will match a price cut, would they ever reduce their price?
Assumptions: (1) Rivals will match price cuts: (2) Rivals will ignore price increases. The gap in the MR curve results from the abrupt change in the slope of the demand curve at the going price. Firms will not change their price because they fear that if they do their total revenue and profits will fall. Shortcomings of the model: (1) It does not explain how the going price evolved in the first place; (2) it does not allow for price leadership and other forms of collusion.
Dominos and Pizza Hut hold 66 percent of the delivered pizza market. Should antitrust action be taken?
Dominos-Pizza Hut merger resulted in a HHI value greater than 1800, so under the guidelines the merger could be challenged. However, if the industry behaves competitively with low entry barriers, antitrust action may be unnecessary.
How would our consumption of cereal change if cereal manufacturers stopped advertising? Would we be better or worse off?
If cereal manufacturers stopped advertising, there would probably be less variety available. This reduction in variety and advertising could reduce the product price, however, the reduction in variety would likely lead to less total satisfaction from the consumption of cereal.
Why are people willing to pay more for Breyer
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.