12P2

Case 1

a. Oligopoly would be the best for this case because Large-scale businesses as Apel Inc. can be
found in oligopolistic industries. Large-scale businesses as Apel Inc. that provide a significant
share of a market have some power over the pricing they charge. from the case that in
comparison to its competitors, Apel Inc. has a high level of market concentration in the industry.
when a Apel Inc releases and sells new items to the market, which mean they would set a price
to their product, before the competitors and after a while, these other companies (competitors
of Apel Inc.) begin to provide comparable items, and they generally take the remaining market
share.
b. B
c. This would be the Cournot oligopoly because of the identical product. When each firm wants
to make an output decision, and they believe their competitors will hold output constant as it
changes output.

From the graph, where Apel Inc output measured in the x-axis and Orange Inc measure in the
Y-axis, if Apel Inc produce 0 unit of output, the profit-maximizing level of output for Orange
Inc would be Q2M. this is the point of Orange Inc reaction to 0 units of Apel Inc. if Apel Inc
produce Q1* unit, the profit-maximizing level for Orange Inc would be Q2*. Q2* is the point
of r2 that corresponds to Q1*.

Case 2

a.

Source, Baye and Prince 2017

The area of ABC is the dead weight loss of the monopoly, created when the 2 companies
merged to increase their economic of scope. The failure of the market to fully maximize social
 walfare is due to market power, the deadweight loss provides a measure of this welfare loss to
society.

Case 3

source, Baye and Prince 2017

a.

Case 4

a. This would be negative externalities, where cost cause by the firm who are not part of the
production. In this case is caused PT. Samjin. When PT Samjin dump their waste to the sea
near Mido Village will have negatively affect people that is not involved in the production or
consumption process.
b.

Chemical

Chemical

Source, Baye and Prince 2017

When PT Samjin dump their waste to the sea that pollutes the water, it shows the negative
externality as the marginal cost of pollution to Mido Village. The marginal cost of pollution to
society will increase as the chemical production increase. Assuming the market for chemical
products is perfectly competitive, S in market supply curve is the sum of the marginal cost. The
market equilibrium B, where the supply intersect demand, results in Qc unit will be purchased
at Pc. At this output, Qc, the society pays a price of A. This amount of the cost to Mido Village
 would have to pay by having their seashore polluted, that PT Samjin dump their waste for free.
The socially efficient level of output Qs, less than the output produce in perfectly competitive
market, there will create Ps which is higher than Pc. The external cost, the market equilibrium
output is greater than the socially efficient level and the market price below the socially efficient
level. In effect, consumers get to purchased too much output at too low price. (Baye and Prince,
2017). This problem can be solved when government defines itself to be the owner of the
environment then it can use its power to induce socially efficient levels of output and pollution
(Baye and Prince, 2017)

c. My policy would be to charge the emitting pollutants, by having this policies hoping that shift
the internal cost up to hopefully equals, or near the social cost of production.