Assignment: Oligopoly and Monopolistically Competitive Firms
In this Assignment, you will compute total cost, total revenue, and total profit/loss. Based on the computed results, you will determine the optimal quantity of output, which minimizes loss under a monopolistically competitive market. In addition, you will also evaluate the marketing strategies of oligopoly market firms.
Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.
1. Do the firms in an oligopoly act independently or interdependently? Explain your answer.
2. A monopolistically competitive firm has the following demand and cost structure in the short run.
Output Price FC VC TC TR Profit/Loss
0 $90 $90 $ 0 ____ ____ ________
1 80 ____ 40 ____ ____ ________
2 70 ____ 80 ____ ____ ________
3 60 ____ 140 ____ ____ ________
4 50 ____ 220 ____ ____ ________
5 40 ____ 320 ____ ____ ________
6 30 ____ 440 ____ ____ ________
7 20 ____ 580 ____ ____ ________
a. Complete the table.
b. What level of output maximizes profit or minimizes loss?
c. Should this firm operate or shut down in the short run? Why?
3. Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology or use the existing bar code. It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies.
a. Does Wal-World have a dominant strategy? Briefly explain.
b. Does Tarbo have a dominant strategy? Briefly explain.
c. Is there a Nash Equilibrium in this game? Briefly explain.