MARKETS WITH MARKET POWER - Tufts University

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Answers to the Cartel Game (class of 36 students): 4A: 36 (where MC ≈ MR, .50 ≈ .56) 4B: 36 × ($1.96 − $.50) = $52.56 4C: $ 52.56/36 = $1.46 (assuming each firm produces 1 unit) 5: (Will students maintain implicit collusion, and make profits? Or will individuals, especially when anonymous, “defect” and produce 2 units, driving down the price? ) Chapter 12 − Markets with Power 20
The Grading Game a) suppose that I graded using a hard-core curve. 1/10 of the students get an "A"; 2/10 get "B"; 4/10 get "C"; 2/10 get "D"; and 1/10 get "F" b) Suppose that one’s relative grade reflects both relative preexisting talent, luck, and relative effort. c) Since we don’t have any control over talent or luck, if people want higher grades, they need to work harder. d) the problem is that there’s a limited number of As and Bs, so that the students are all competing over them. If I work hard and move up to an A, then someone else is pushed down. e) thus, there's an incentive for the students to restrict their efforts. If everyone colludes to not work very hard, you'd still see pretty much the same distribution of grades as when everybody works hard. The benefit is that less effort is needed, though less economics is learned. If grades are all that's important to you, then the latter is unimportant. f) the problem of free riders can undermine the attainment of the collective good. These are students who either care about the grade enough that they are willing to take advantage of their fellow students by working more than agreed upon, in order to rise in the ranks. Or these students might really want to learn economics. g) a well-organized cartel of students could make sure that free riders don't cheat. They could throw big parties the night before the exam and make sure that everyone attends. Perhaps punish the ones who "free ride" on the rest. Chapter 12 − Markets with Power 21
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Page 3 and 4: • Monopolists may also use their
Page 5 and 6: Notes on Text Discussion Questions
Page 7 and 8: most likely engage in non-price com
Page 9 and 10: Quantity of Output (Demanded) Selli
Page 11 and 12: Competition and Concentration There
Page 13 and 14: Table 2: Production and Costs under
Page 15 and 16: Exercise on Monopoly Profit-Maximiz
Page 17 and 18: Question on Monopoly Profit Maximiz
Page 19: industry demand curve AWE's MR q p

MARKETS WITH MARKET POWER - Tufts University

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