hey...i had a similar econ question..check out schoolpiggyback (search it on google)...it'll help ya out...its other students that answer your question (maybe someone from your class...lol)...goodluck : )
3. A large share of the world supply of diamonds comes from Russia and South
Africa. Suppose that the marginal cost of mining diamonds is constant at $1,000
per diamond, and the demand for diamond is described by the following schedule.
Price/Quantity: 8000/5000, 7000/6000, 6000/7000, 5000/8000, 4000/9000, 3000/10000, 2000/11000, 1000/12000
(a) If there were many suppliers of diamonds , what would be the price and
quantity?
Would it be at a price between $7,000 and $6,000 and a quantity between 6,000 and 7,000.
(b) If there were only one supplier of diamonds, what would the price and quantity be?
Wouldn't the price be $6,000 at a quantity of 7,000.
(c) If Russia and South Africa formed a cartel, what would be the price and quantity?
Wouldn't the price be $6,000 at a quantity of 7,000.
If the countries split the market evenly, what would be South Africa’s production and profit?
Would South Africa's production be 3,500 and profit be 38,500,000.
What would happen to South Africa’s profit if it increased its production by 1,000 while Russia stuck to the cartel agreement?
The profit would increase for South Africa.
(d) Use your answer to part
(c) to explain why cartel agreements are often not successful.
Since members of the cartel seeing the need for money they increase their total revenue by cheating. Which is one of the many problems in maintaining a successful Cartel.
4. This chapter discusses companies that are oligopolists in the market for the goods they sell. Many of the same
ideas apply to companies that are oligopolists in the market for the inputs they buy.
a. If sellers who are oligopolists try to increase the price of goods they sell, what is the goal of buyers who are
oligopolists?
Isn't the goal of buyers is to get the goods at a fixed price.
b. Major league baseball team owners have an oligopoly (perhaps even a monopoly) in the market for baseball
players. What is the owners’ goal regarding player salaries?
Isn't the owners' goal is to have a fixed salary.
Why is this goal difficult to achieve?
Isn't the goal difficult because of cheating in some owners giving players more money to get that key player(s).
c. Baseball players went on strike in 1994 because they would not accept the salary cap that the owners wanted
to impose. The proposed salary cap would have established a maximum total expenditure on salaries for each
team (let the total expenditure on salaries for a team be the sum of all the player salaries for that team). If the owners were already colluding over salaries, why did the owners feel the need for a salary cap?
Wouldn't it be to prevent any desire by the players to go to other teams for a better salary.
3) Start by drawing a demand "curve". By your schedule, the demand curve could be written as P=13000-1000Q.
3a) Firms will continue to produce as long as price is above the marginal cost of 1000. So, final output Q will be very close to 12000
3b) for a monopoly, construct a marginal revenue curve. In this example, MR=13000 - 2000Q. Solve for MC=MR
3c) Cartels act like monopolists
3d) Take a shot.
4a) the goal of all buyers is to buy at the lowest price possible. (not necessarily a fixed price)
4b) same answer as 4a)
4c) some owners were "cheating" in their collusion to limit salaries, and paying higher salaries to better players. Further, better players were demanding, (and getting) higher salaries.
Ah, economics, the study of how people make decisions about money...and sometimes how they make decisions about baseball players too! Let's see if I can help you out with these questions!
(a) If there were many suppliers of diamonds, the price and quantity would likely be between $7,000 and $6,000 and a quantity between 6,000 and 7,000. It's like a "diamond rush" where everyone wants to get a piece of the sparkle!
(b) If there were only one supplier of diamonds, the price and quantity would be $6,000 at a quantity of 7,000. It's like having a fancy diamond boutique all to yourself!
(c) If Russia and South Africa formed a cartel, the price and quantity would also be $6,000 at a quantity of 7,000. It's like they're joining forces to become the "diamond kings"!
If the countries split the market evenly, South Africa's production would be 3,500 and profit would be 38,500,000. That's a whole lot of shiny profit!
If South Africa increased its production by 1,000 while Russia stuck to the cartel agreement, South Africa's profit would increase. It's like they're shining brighter than ever!
(d) Cartel agreements are often not successful because members of the cartel see the need for more money and end up cheating. It's like the saying goes, "Money can make you do funny things...like breaking agreements!"
Now onto question 4!
(a) If sellers who are oligopolists try to increase the price of goods they sell, the goal of buyers who are oligopolists is to get the goods at a lower price. It's like a never-ending price war!
(b) The goal of Major League Baseball team owners regarding player salaries is to have a fixed salary. It's like they're trying to build a team without breaking the bank!
However, this goal is difficult to achieve because some owners cheat by giving players higher salaries to attract the star players. It's like trying to keep everyone on the team happy...and well-paid!
(c) The owners felt the need for a salary cap because they wanted to prevent players from going to other teams for a better salary. It's like they're trying to keep their team's "star players" from jumping ship!
I hope my answers were helpful and put a smile on your face! Good luck with your econ studies, and remember, laughter is the best economic stimulus!
To answer these questions, you can follow these steps:
3. a) To determine the price and quantity with many suppliers of diamonds, you can use the demand schedule and find the point where the price is between $7,000 and $6,000 and the quantity is between 6,000 and 7,000. In this case, the price would be $6,000 and the quantity would be 7,000.
b) To find the price and quantity with only one supplier, you can assume that this supplier has full control over the market. In this case, they could set the price at $6,000 and the quantity at 7,000.
c) If Russia and South Africa formed a cartel, they could act together to control the supply and set the price and quantity to maximize their profits. Following the same logic, the price would be $6,000 and the quantity would be 7,000.
To determine South Africa's production and profit under the cartel agreement, you need to understand how the market is split between the two countries. If the market is split evenly, South Africa's production would be half of the total quantity, which is 3,500. To calculate the profit, you can multiply the quantity by the price, so South Africa's profit would be $6,000 * 3,500 = $21,000,000.
If South Africa increased its production by 1,000 while Russia stuck to the cartel agreement, South Africa's profit would increase because they would be able to sell more diamonds at the cartel price. So their profit would increase by the additional quantity multiplied by the price, which is $6,000 * 1,000 = $6,000,000.
d) Cartel agreements are often not successful because members of the cartel have an incentive to cheat in order to increase their individual profits. This is what we see in the example above when South Africa increases its production despite the cartel agreement. Members may go against the agreement to increase their total revenue, leading to the breakdown of the cartel.
4. a) The goal of buyers who are oligopolists is to buy goods at the lowest possible price, not necessarily a fixed price.
b) In the case of major league baseball team owners, their goal regarding player salaries is to have control over the salaries and keep them at a manageable level.
The goal of having a fixed salary is difficult to achieve because some owners may be willing to cheat by offering higher salaries to players to attract them to their team. This can lead to bidding wars and higher player salaries.
c) The owners felt the need for a salary cap because they wanted to impose a maximum total expenditure on salaries for each team. This means that they wanted to limit the amount of money that could be spent on player salaries to prevent excessive spending and maintain a certain level of control over team finances. The proposed salary cap was a measure to maintain collusion among owners and prevent players from seeking higher salaries from other teams.