1.
2.
Student: _____________________
Date: _____________________
Instructor: Robin Dhakal
Course: Hu
ard/O'Brien: Essentials of
Economics, 6th Edition
Assignment: Exam 3- ECO 2023
(1) would
would not
probably would not
may
Suppose an industry has firms, each with an equal percent share of the market. According to the
Herfindahl-Hirschman Index (HHI), if two firms propose to merge, will the Department of Justice and the Federal Trade
Commission allow it?
4 25
First, the HHI before the proposed merger is . (Enter your response as an integer value.)
With the proposed merger, the HHI is . (Enter your response as an integer value.)
The Department of Justice and the Federal Trade Commission (1) challenge the proposed merger.
Isabella grows pumpkins. Her average variable cost (AVC),
average total cost (ATC), and marginal cost (MC) of
production are illustrated in the figure to the right.
Assume the market for pumpkins is perfectly competitive
and that the market price is $ per box.4.00
If Isabella produces the profit-maximizing quantity of
pumpkins, what will be her profits?
Isabella will earn a profit of $ thousand. 
(Enter your response rounded to two decimal places.)
What will Isabella's profit be if she shuts down in the short
un and produces nothing?
Isabella's profit will be $ thousand. (Enter
your response rounded to two decimal places.)
XXXXXXXXXX
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
Quantity (boxes in thousands)
P
ic
e
($
p
e
ox
)
MC
ATC
AVC
3. The graphs for monopoly and monopolistic competition appear quite similar, but the details of each of these graphs are
different. What is the primary distinction between these two graphs?
4.
(1) advertise
not advertise
(2) advertise
not advertise
A town has two gas stations, BP and the Mini-Mart (MM).
The gas stations must choose whether to advertise their
gasoline.
The advertising strategies with co
esponding profits are
illustrated in the payoff matrix to the right. BP's profits are in
ed and the Mini-Mart's are in blue.
What is each firm's dominant strategy?
BP's dominant strategy is to (1) and the
Mini-Mart's dominant strategy is to (2) .
What is the Nash equili
ium for this game?
A. BP and the Mini-Mart will both not
advertise.
B. BP and the Mini-Mart will both advertise.
C. BP will advertise and the Mini-Mart will
not advertise.
D. BP will not advertise and the Mini-Mart
will advertise.
E. The game has no Nash equili
ium.
MM
Not Advertise
Advertise
BP
Advertise Not Advertise
$240
$150
$180
$270
$180
$450
$300
$300
5. Suppose that 3-D printing technology vastly reduced the fixed costs and economies of scale for producing cars. What kind
of market structure might come about after this change?
6. In recent chapters, we explored different types of industries
that firms may be in, including: perfect competition,
monopolistic competition, and monopoly.
1.) Using the point drawing tool, plot the point that
co
esponds to the profit-maximizing price and quantity in a
perfectly competitive industry. Label this point ' '.EPC
2.) Using the point drawing tool, plot the point that
co
esponds to the profit-maximizing price and quantity for a
monopoly. Label this point ' '.EMon
Carefully follow the instructions above, and only draw the
equired objects.
Under each of these market structures, there is a common
method that firms use to determine how much of a good or
service to produce. What is that method, and how does it
differ across the different market structures?
Quantity
P
ic
e
($
)
MC
DMR
7.
8.
The graph to the right depicts the demand for caffe lattes at
a local coffeehouse along with the average total cost and
marginal cost of producing lattes. Suppose the coffeehouse
is in a monopolistically competitive market in the short run.
How many caffe lattes should this coffeehouse produce to
maximize profits? units.  (Enter a numeric
esponse using an integer.)
What is the co
esponding profit-maximizing price? 
$ per latte.  (Enter a numeric response using
a real number rounded to two decimal places.)
Calculate the coffeehouse's profits on caffe lattes. 
$ . (Enter a numeric response using a real
number rounded to two decimal places.)
Quantity of caffe lattes (per day)
P
ic
e
an
d
co
st
(d
ol
la
s
p
e
c
up
)
DMR
MC
ATC
(1) not continue
continue
(2) experience losses
eak even
make profit
The figure to the right illustrates the situation regarding a
natural monopoly.
If government regulators want to achieve
economic efficiency, what price should they regulate?
(Assume the natural monopoly produces at whatever price is
egulated).
If government regulators want to achieve economic
efficiency, they should regulate a price of $ .
(Enter your response as an integer.)
In the long run, will the natural monopoly produce at this
egulated price?
The natural monopoly will (1) to produce
ecause at such a price, it would (2) .
What price could government regulators set to maximize
efficiency such that the firm would not experience losses?
Government regulators should regulate a price of
$ . (Enter your response rounded to two
decimal places.)
XXXXXXXXXX XXXXXXXXXX
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
6.00
Quantity (units in 1000s)
P
ic
e
an
d
co
st
42
3.20
2.00
105
2.42
2.90
DMR
ATC
MC