‘-Unit 6 Assignment: Monopolistic Competition Profit Maximization and Oligopoly Strategies


In this assignment, you will be assessed on the following Outcome:

MT445-3: Analyze the production decision in profit maximization for the four primary market structures.

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: This assignment requires a combination of short paragraph answers and computations. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this assignment.

Do the firms in an oligopoly act independently or interdependently? Explain your answer
A perfectly competitive firm has the following fixed and variable costs in the short-run. The market price for the firm’s product is $140.
Output FC VC TC TR Profit/Loss

0 $80 $0 ___ ___ ___

1 80 90 ___ ___ ___

2 80 170 ___ ___ ___

3 80 290 ___ ___ ___

4 80 430 ___ ___ ___

5 80 590 ___ ___ ___

6 80 770 ___ ___ ___

Complete the table.
What level of output should the firm produce to maximize profits?
Assume this firm is making a loss when it produces its 7th unit of output. What should the firm do in the short-run? Should it operate at loss or shutdown in the short-run?
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 $30 $0 ____ ____ ________

1 80 ____ 40 ____ ____ ________

2 70 ____ 80 ____ ____ ________

3 60 ____ 140 ____ ____ ________

4 50 ____ 220 ____ ____ ________

5 40 ____ 320 ____ ____ ________

6 30 ____ 440 ____ ____ ________

7 20 ____ 580 ____ ____ ________

Complete the table.
What level of output maximizes profit or minimizes loss?
Should this firm operate or shut down in the short-run? Why?
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.

(Descriiption of the graph: The payoff matrix shows two oligopoly companies: Wal-World and Tarbo, which are competing to increase their market share and payoffs. They have two strategies, which are playing existing bar code and new bar code. The two companies get different payoffs when they play different strategies.)

Does Wal-World have a dominant strategy? Briefly explain.
Does Tarbo have a dominant strategy? Briefly explain.
Is there a Nash Equilibrium in this game? Briefly explain.

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