Econ

Rhonda Whiters

ECN101

Feb 3, 2011

Prof. Natasha Alford

Ch. 5

2.) a. $2.00 profit per unit sold

b. $200 total profit

Ch. 6

1.) The meaning of a Top 4 concentration ratio of 20% and85% is that 20% is low concentration industry and it only accounts for a small portion of the industries output. 85% is high concentration and it accounts for a high portion of the industries output.

EOC Checkpoint

Ch.5

1.) The justification for this policy was that the Central Office Supply System, as a single buyer, had the leverage to obtain office supplies at the lowest possible cost and this pass the cost savings through to state agencies in lower prices.

2.) a. The USPS have a legal monopoly on the delivery of first class letter mail for protection from competition.

b. Critics call for privatization of the USPS to auction the USPS to an owner who would operate it on a for-profit basis. It is argued that the resulting cost savings and quality improvements would promote reasonable prices for consumers.

c. I would agree to privatization if it is proven to benefit consumers.

Ch. 6

3.) Cartels are difficult to form and operate because cartel members will be tempted to cheat on their agreement to limit production. By producing more output than it has agreed to produce, a cartel member can increase its share of the cartel's profits. Hence, there is a built-in incentive for each cartel member to cheat. Of course, if all members cheated, the cartel would cease to earn monopoly profits, and there would no longer be any incentive for firms to remain in the cartel. The cheating problem has plagued the OPEC cartel as well as other cartels and perhaps explains why so few cartels exist.

http://www.cliffsnotes.com/study_guide/Cartel-Theory-of-Oligopoly