The two firms have different costs of production

Assignment Help Business Economics
Reference no: EM13887762

a. Consider the iron ore production industry, and assume that there are just two producers, FM and BHP. Initially assume that both firms are identical in terms of their production costs. If the two firms can cooperate, what should they do in order to maximise industry profits? How does your answer change if: (i) price discrimination is feasible; or (ii) the two firms have different costs of production? If you are working as a consultant for the ACCC, how would you view cooperation between the two iron ore producers?

b. Now assume that each firm is free to set its production level, but each firm can communicate (via the business press) what they plan to do first. Using an economic model, show that it might be difficult to sustain a cooperative (high-profit) outcome. Given this, how credible do you view any statement on capacity by Twiggy? What do you anticipate would be the impact of the entry of another producer (who we can call RT)?

c. Thinking more broadly than iron ore, how can two oligopolists try to avoid being caught in a competitive outcome? Are any of these relevant for the iron ore industry?

Reference no: EM13887762

Previous Q& A

  Federal laws and regulations have on international business

What impact do Federal laws and regulations have on international business? Name at least 3 different types of laws that affect international businesses (Cite country/product examples where appropriate)

  Two firms identical production costs

Two firm’s identical production costs, how do they maximize profits, how does this change if price discrimination is feasible or if the two firms have different costs of productions?

  Single amount value the dealer receives at the end of loan

You owe $350 a month on a 5 year car loan financed at %6 per month compounded monthly. What is the single amount value the dealer receives at the end of the loan?

  Equivalent variation of your companys compensation plan

Assume that in your first job after graduating from college you live in a city where the price of food is PF and the price of housing is PH. You consume F1 of food and H1 of housing per year. Using both your graph and a written explanation describe h..

  Cities often impose water use restrictions on consumers

During droughts, cities often impose water use restrictions on consumers. Suppose Rusalka has preferences for Water (W) and other goods (X) given by the utility function: U(W, X) = WX. Suppose the government imposes a quota limiting water use to a ma..

  Utility function-club devoted to the consumption of good

Sam’s utility function is U(x1, x2) = 2x1 + x2, where x1 is the number of units of good 1 he consumes per week and x2 is the number of units of good 2 he consumes per week. Sam has $200 a week to spend.If he belonged to the club, he could buy good 2 ..

  What is your optimal consumption bundle

You live in a world with two time periods. Your income is $100 in time period 1 and $150 in period 2. If the interest rate is 0.03 (3%), draw your inter temporal budget constraint. Now suppose current and future consumption are perfect complements yo..

  Consider the case of gold standard economy

Consider the case of a gold standard economy, What effect would you expect an increase in the price of gold to have on the level of domestic real GDP, and why? What effect would you expect the change in real GDP to have on net exports?

  Deal a nearby nuclear power plant is condemned

If I spent all my money ($450,000) on a new house I could buy a house with 4500 square feet. I settle for a 1500 square foot house. (Each square foot costs the same.) The day after I close the deal a nearby nuclear power plant is condemned and the va..

  Government imposes both sales tax and excise subsidy

Cigarettes currently sell for $10 a pack. Suppose the government imposes both a $4 sales tax and a $7 excise subsidy on cigarettes. Use a graph to demonstrate that the new price must be somewhere between $3 and $6 a pack.

Reviews

Write a Review

 

Similar Q& A

  What is the net present value of purchasing the tractor

Farm must decide whether or not to purchase a new tractor. The tractor will reduce costs by $2,000 in the first year, $2,500 in the second and $3,000 in the third and final year of usefulness. The tractor costs $9,000 today, while the above cost savi..

  Illustrate what is which industry marginal revenue

illustrate what is which industry's marginal revenue as it increases o/p from 1300 units to 2200 units.

  What is the present discounted value-what is interest rate

If the interest rate is 5%, what is the present discounted value of receiving $100 in two years? If the present discounted value of $100 received 3 years from now is $81.63, what is the interest rate?

  Describe in words how to interpret the coefficient

You gather data on US workers aged 22 to 55 from the Current Population Survey. You define the Average Hourly Wage as self-reported total annual labor income divided by self-reported total annual work hours. Describe in words how to interpret the coe..

  Describe the process this industry will go

Now assume that production technology improves such that average total costs decline by $5 a unit. Describe the process this industry will go through as it moves to a new long-run equilibrium.

  Evaluate the results of the regression equation

Evaluate the results of the regression equation tells managers and how it is likely to impact decisions made related to maximizing profitability.

  Piercing the corporate veil

Smith Services, Inc., was a corporation solely owned by Tony Smith. Bear, Inc., owned and operated Laker Express, a fueling station in Kentucky. Smith charged fuel to an account at Laker Express and owed approximately $35,000. There was no written ag..

  What are the basic elements of health insurance

What are the basic elements of health insurance? Define and discuss these elements. For example, what are risk and uncertainty and why are they important concepts in health insurance? What are the benefits and drawbacks to having employers as the pri..

  Q1 how does the theory of efficient production apply to

q1. how does the theory of efficient production apply to managers of government bureaus or departments that are not run

  Intermediaries come from a competitive marketplace

change if buyers pay $8 every unit to the intermediary but sellers offer to rebate part of that expense to buyers.

  What is the price of an hour of leisure

What is the price of an hour of leisure? An hour of nonmarket work? What does it mean to say that leisure is a normal good? Why doesn't the market supply curve for labor bend backward?

  Effect when the paicenes vineyard was leased by heublein

Was there a UFW-Almaden contract in effect when the Paicenes vineyard was leased by Heublein to Glen Ellen

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd