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ECON001- PS11 PROBLEM SET # 11 CHAPTER 15 PROBLEMS PROBLEM 1 - Intel and Advanced Micro Devices make most of the chips that power a PC
ECON001- PS11
CHAPTER 15 PROBLEMS
PROBLEM 1 - Intel and Advanced Micro Devices make most of the chips that power a PC. What makes the market for PC chips a duopoly? Sketch the market demand and cost curves that describe the situation in the market and that prevent firms from entering.
PROBLEM 3 - Oil Industry in the Philippines
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The Philippines oil industry, traditionally, has been dominated by three big refineries: Shell, Petron, and Caltex. In 2000, new oil entrants and LPG refillers filed complaints about the predatory pricing strategies of the Big Three, and favoring their own market refillers. To maintain market share, the Big Three sold petroleum and diesel at a price below average variable cost, which undercuts competition from new players. |
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Source: Philstar and Venngage, November 30, 2000 |
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3.a - Explain why the news clip implies that the oil industry in 2000 in Philippines was not perfectly competitive.
3.b - Were the three big companies competing fairly with new entrants? What barriers to entry might limit competition and allow the big companies to influence the oil price?
PROBLEM 4 - Consider a game with two players who cannot communicate, and in which each player is asked a question. The players can answer honestly or lie. If both answer honestly, each receives $100. If one player answers honestly and the other lies, the liar receives $500 and the honest player gets nothing. If both lie, then each receives $50
4.a - Describe the strategies and the payoffs.
4.b - Construct the payoff matrix
4.c - What is the equilibrium of this game?
4.d - Compare this game to the prisoners’ dilemma. Are the games similar or different? Explain.
CHAPTER 17 PROBLEMS
Use the following table to work Problems 17 to 19.
The first two columns of the table show the demand schedule for electricity from a coal-burning utility; the second and third columns show the utility’s cost of producing electricity. The marginal external cost of the pollution created equals the marginal cost.
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Price (cent per kilowatt) |
Quantity (kilowatts per day) |
Marginal Cost (cents per kilowatt) |
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04 |
500 |
10 |
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08 |
400 |
08 |
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12 |
300 |
06 |
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16 |
200 |
04 |
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20 |
100 |
02 |
PROBLEM 17 - With no government action to control pollution, what is the quantity of electricity produced, the price of electricity, and the marginal external cost of the pollution generated?
PROBLEM 18 - With no government action to control pollution, what is the marginal social cost of the electricity generated and the deadweight loss created?
PROBLEM 19 - If the government levies a pollution tax such that the utility produces the efficient quantity, what is the price of electricity, the tax levied, and the government’s tax revenue per day?
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