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12.2. Refer to Figure 12.1. Suppose demand is Q = 10,000-1,000 P and marginal cost is constant at MC=6. From the given demand curve, one can compute the following marginal revenue curve: MR 10 500 a. Graph the demand, marginal cost, and marginal revenue curves. b. Calculate the price and quantity associated with point C, the perfectly competitive outcome. Compute industry profit, consumer surplus, and social welfare. c. Calculate the price and quantity associated with point M, the monopoly/perfect cartel outcome. Compute industry profit, consumer surplus, social welfare, and deadweight loss. d. Calculate the price and quantity associated with point A, a hypothetical imperfectly competitive outcome, assuming that it lies at a price halfway between C and M. Compute industry profit, con- sumer surplus, social welfare, and deadweight loss 12.1. The pricing game between two firms, which can each set either a low or a high price, is given by the follow ing normal form. Low price High price Low price High price 2, 2 3, 3

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How have the Kindle and the iPad affected the supply and demand for newspapers and other printed material (such as textbooks)? Discuss the impact of technology on those industries that produce printed information.

The text describes how a monopoly occurs when a provider of a service or good has control of all or nearly all of its market. Using this definition, consider whether professional sports leagues such as the National Football League, Major League Baseball, and the National Hockey League are monopolies or whether these leagues consist of a group of individual companies that operate under a single governing entity. Consider players’ salaries, contract negotiations, and ticket sales in your answer. What are the implications if these professional sports leagues are monopolies?

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One effect of German unification was a rise in demand for most Western countries’ exports. However, the impact differed considerably among countries, depending on the multipliers that transform an exogenous change in demand into a change in income. Consider the Netherlands and the United Kingdom. The share of imports in Dutch GDP is 52%, the share of imports in British GDP is 27%. Assume that these average import propensities are also the marginal propensities to import. Assume, further, that for both countries the marginal propensity to consume is 80% and the average tax rate is 30%. (a) Calculate the equilibrium effect of an exogenous increase of export demand by 100 units on Dutch and British GDP. (b) Employ the successive-rounds interpretation of the multiplier. By how much has income increased after round #3 in total?

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Reaction Time In an online psychology experiment sponsored by the University of Mississippi, researchers asked study participants to respond to various stimuli. Participants were randomly assigned to one of three treatment groups: Group 1, the simple group, required to respond as quickly as possible after a stimulus was presented; Group 2, the go/ no-go group, required to respond to a particular stimulus while disregarding other stimuli; and Group 3, the choice group, required to respond differently depending on the stimuli presented. The researcher felt that age may be a factor in determining reaction time, so she organized the experimental units by age and obtained the following data:

(a) What type of factorial design is this? How many replications are there within each cell?

(b) Normal probability plots indicate that it is reasonable to believe that the data come from populations that are normally distributed. Verify the requirement of equal population variances.

(c) Determine if there is significant interaction between stimulus and age.

(d) If there is no significant interaction, determine whether there is significant difference in the means for the three types of stimulus. If there is no significant interaction, determine whether there is significant difference in the means for the three categories of age.

(e) The residuals are normally distributed. Verify this.

(f) Draw an interaction plot of the data to support the results of parts (c) and (d).

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