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ECON 3310 – Microeconomics Spring 2021 – David Quigley

Group Report 4 – Due Monday, May 3rd

Write a minimum of 4 pages, double-spaced, answering the questions below. If you include figures, those count towards the page minimum. Be as specific as possible and always include explanations that describe your reasoning.

Suppose you’re writing a report for the CEO of a theme park entertainment company. The CEO has the following questions she would like analyzed and answered as well as possible.

1. Suppose the market for kids’ rides is Perfectly Competitive. What characterizes the long- run equilibrium under Perfect Competition? What is the relationship between Long-Run Average Total Cost and the profit maximizing quantity in the long-run?

a. Suppose there’s a decrease in demand for kids’ rides. What are the short-run and long-run impacts of the decrease in demand on the market, specifically, the market quantity, market price, and the number of businesses producing kids’ rides?

2. Suppose the market for roller coasters is a Monopoly. What are the differences in the assumptions behind Monopoly and Perfect Competition? What is the impact of Monopoly power on the firm’s Marginal Revenue? What is the profit maximizing quantity for a firm under Monopoly? How is the market price determined in a Monopoly market?

a. How does a Monopoly compare to Perfect Competition in terms of economic efficiency, consumer surplus, and producer surplus?

3. What are the similarities and differences between Monopolistic Competition and

Perfect Competition? What assumptions are the same and what assumptions are different? How is Monopolistic Competition similar to and different from Perfect Competition in the short-run and the long-run?

a. What aspects of Monopolistic Competition are similar to Monopoly? What are the key differences between Monopolistic Competition and Monopoly?

4. Suppose the CEO is considering trying to implement Perfect Price Discrimination (First- Degree Price Discrimination). What might be some obstacles to engaging in Perfect or First-Degree Price Discrimination? What is the impact of Perfect or First-Degree Price Discrimination on the firm’s Marginal Revenue? What is the impact of Perfect or First- Degree Price Discrimination on economic efficiency, consumer surplus, and producer surplus?

a. How can Block Pricing (Second-Degree Price Discrimination) approximate Perfect Price Discrimination (First-Degree Price Discrimination), and what are the implications in terms of economic efficiency, consumer surplus, and producer surplus?

b. What is Segmenting or Third-Degree Price Discrimination? What are some consequences of engaging in Segmenting or Third-Degree Price Discrimination?

5. What does Game Theory suggest is required for cooperation between two players in a

game, and how might this apply to other circumstances?