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1)Budweiser, Miller and Coors who together produce 809 of all beer consumed in the US, each spend well over $500 million year on television advertising campaigns promoting their beer brands Do you think these firms would welcome ongressional legislation which restricted the amount that any one firm could spend on ach vertising to $10 million yearly and chereby allowed them all to reduce their costs dramatically without fear of losing ground to each other? Explain your answer. 2)"Most commercial fish species in nearly every ocean and sea are being rapidly depleted in what marine biologists and other specialists warnis evolvinginto one of the worst ecological disasters of modern times. According to the United Nations the world's 15 million fishermen and 23 million tons of fishing vessels represent twice as much fishing power as major stocksoffishcan Sustain." Assume that ocean fishing resembles competitive market in the following ways there areno significant barciers to entry and there are enough individual fishermen so that no one of them can affect the market price of fish. a) Explain why the conditions characteristic of competitive markets normally lead profit maximizing firms to make choices about resource use that lead toan 'efficient" allocation of resources. b) Given your answerto (a) explain why unregulated competition has led to such serious overallocation of resources to fishingi the commercial fishing industry? 3) Burning of fossil fuels emits carbon oxides into the atmosphere, which many scientists believe increases the rate at which the earth's climate is warming Gasoline emissions from internal combust ion engines also produce volatile organic compounds (voc's) which contribute to smog creation when air inversion conditions are present. Which of the following two approaches to reducing harmful auto emissions likely to be more efficient inachieving desired targetlevel of emissions reduction from internal combustion engines? Explain your answer in paragraph or two. a) legislate that within! years all automobile manufacturers must meet some sharply higher minimum mileage standard averaged over all new vehicles sold I by the manufacturer than now customary in the industry or face heavy fines b) Raise the federal excise tax on gasoline sharply while reducing federal income tax rates such that the total amount of tax revenues collected by the federal government from all US households combined does not change, (Although the tax burden on individual households may shift) 4) Discuss the following excerpt from an article in the Wall Street Journal several years ago In your use the concepts of: "price scrimination, 'elasticity and "barriers to entry to information in the article to explain both the current success of Han ah's strategy; and the prospects for continued success with the strategy TUNICA, Miss She doesn' know it,but Linda Marar the subject of behavior: experiment thatcould change odds gambling business The Memphis, Tenn retiree, her blouse bedecked with sequined cards: dice has just received invitations to twonearby slot tournaments, along with vouchers for $200 all courtesy Harrah's Entertainment Inc. "Harrah's savvy, says Ms Maranees, who admits thatoncein the casino door she bound to spend much more than what Harrahl has givenher That exactly what the Las Vegas- based company banking on. Over the past two years, larrah's has quietly conducted thousands clinical style trials to determine what gets people gamble more. Based onits findings, Harrah's has developed closely guardedr (strategies tailored individually tothe millions oflow rollers who make up its bread and butter business The results are impressive enough that other casino companies are copying some of Harrah's more discernible methods. Atthe center Harrah's strategy is a former Harvard professor named Gary Loveman and vast mathematical model much like ones that dines use tofill seats with the highest- paying fliers But this one scores gamblers on how profit table they can beto Harrah's Richard Mirman the company senior vice president who refined the model boasts that itis Harrah' "secret recipe" ona par with the famous unrevealed formula Kentucky Fried Chicken. The model tells Harrah's marketers how appeal gamblers such Ms Maranees, based on data tracking their previous behavior casinos. Spitting out "behavior modification reports, Harrah comput suggest that Ms Maranees -an avid slot tournament player will respond best cash offer while "ina Montgomery real estate agent from nearby Ixford, Miss. better motivated by free hotel room As Ms Montgomery gambles downstairs she explains "my husband stays in the room. 5) Testifying at price fixing trial involving Cargil Corp and the market for chicken growth hormone, (in which Cargill is one of only three firms worldwide), an executive for Perdue said: "It's an oligopoly When one (firm) changes price, they all doand usually within minutes. Whyis not surprising to find that in an oligopoly with very few firms each of which sells a basically undifferent lated product like chicken growth hormone, all the firms change prices simultaneously, eveni there is no explicit price fixing? 6)Assume the graph below represents the market demand for patented prescription drug together with the firm- level marginal cost and average cost functions for producing the drug Assume these cost curves do not reflect R&D costs of developing this drug but only reflect production costs of the drugonce the formula for itis known (Noter the diagram assumes that in the output range from 250 400 thousand Mo -ATC $20). Rising MC at O> 400 .000 increases. ATC.) A) Draw the marginal revenue function for this firm. B) What sthe profit maximizing price for this firm? C)On the graph show the area that represents the economic profit resulting from the firm's exercise of monopoly power conferred by its patent Explain your answer briefly. D) there were no patent to prevent entry, what would the 'efficient° level of output of this prescription drugbe7 E) What do you predict happen tothe structure of competitionand to the price this market when the patent expires? (Hint use the concept of 'Minimum efficient scale 'of production in your answer.) F) Why does the US government create monopoly power through the patent system given the net efficiency loss from monopoly power? Explain in paragraph. SP per pressip ticn 100 MC D 041 ATC ATO 20 M Q | | scripts week 100 (1000's) 100 500 mo

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1. The companies do not prefer legislation that curtails their actions. Limiting the amount to $10 million for advertising costs would make it harder for all three of beer producers to gain advantage through marketing. Budweiser, Miller and Coors all want to keep and increase their market share, not loose. If this legislation was to come through, it is likely that the barriers for entering this oligopolistic market would lower and other firm could take some of the business away from them.
This legislation would be preferable by the smaller companies on the market, because it restricts the larger ones. The firms that constitute the other 20% of market share will be...
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