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1. Market Structure (65 points)Graph a comparison of the short-run and long-run profits, price, quantity, MR and MC of a Monopoly and a PC firm. Which type of firm is more efficient and why? (30 points) Graph the short-run and long-run equilibrium of a Monopolistically Competitive firm. Are they efficient? Why or why not? (10)What is the market structure? Give an example and the characteristics of each type of structure. (10)Assuming that there are only 2 airline companies in the U.S. flying between Newark and Miami, Delta and Continental, what is the ((Nash) Equilibrium) or price that each company in the following matrix will charge? At that price, what are the profits for each company? Note that the first number listed in bold is the profit for Delta and the second number listed that is in italics is the profit for Continental. (10)Can Delta and Continental Collude to increase their profits? Why or why not? (5)Continental $299 $399 $499 Delta $299$13000 $22000$16000 $19000$20000 $16000$399$12000 $18000$15000 $15000$18000 $13000$499$9000 $14000$13000 $12000$16000 $10000
If the U.S. wants to maximize tax revenues, should we impose an excise tax on airline travel or alcohol? Why? Make sure to include a graph and the equation for elasticity and your assumptions regarding the elasticity of demand for both products.(10) International Trade (15)
What is the difference between an absolute and comparative advantage? Give an example. (5) What are two ways nations prohibit trade? (Make sure to include the appropriate graphs for both the U.S. and the foreign country) Who benefits and who pays for this action? (10)4. What are the 4 types of market failure? Explain each and give an example of each. (10)
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1. Market Structure (65 points)
A. Graph a comparison of the short-run and long-run profits, price, quantity, MR and
MC of a Monopoly and a PC firm. Which type of firm is more efficient and why?
(30 points)
B. Graph the short-run and long-run equilibrium of a Monopolistically Competitive
firm. Are they efficient? Why or why not? (10)
C. What is the market structure? Give an example and the characteristics of each
type of structure. (10)
D. Assuming that there are only 2 airline companies in the U.S. flying between
Newark and Miami, Delta and Continental, what is the ((Nash) Equilibrium) or
price that each company in the following matrix will charge? At that price, what
are the profits for each company? Note that the first number listed in bold is the
profit for Delta and the second number listed that is in italics is the profit for
Continental. (10)
E. Can Delta and Continental Collude to increase their profits? Why or why not? (5)
$299
$299
$13000
$22000
Delta
$399
$12000
$18000
$499
$9000
$14000
Continental
$399
$16000
$19000
$15000
$15000
$13000
$12000
$499
$20000
$16000
$18000
$13000
$16000
$10000
2. If the U.S. wants to maximize tax revenues, should we impose an excise tax on airline
travel or alcohol? Why? Make sure to include a graph and the equation for elasticity
and your assumptions regarding the elasticity of demand for both products.(10)
3. International Trade (15)
A. What is the difference between an absolute and comparative advantage? Give an
example. (5)
B. What are two ways nations prohibit trade? (Make sure to include the appropriate
graphs for both the U.S. and the foreign country) Who benefits and who pays for
this action? (10)
4. What are the 4 types of market failure? Explain each and give an example of each.
(10)

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