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24 Aug 2019

Buyers consider Marlboro cigarettes and Budweiser beer to be complements. If Marlboro just increased its prices, what would you expect to occur in the Budweiser market?

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7 Apr 2022
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Related questions

**PLEASE NUMBER/LABEL EACH ANSWER **

1) Budweiser (now owned by a Belgium based beer company called InBev), Miller and Coors who together produce 85% of all beer consumed in the US, each spend well over $250 million a year on television advertising campaigns, promoting their beer brands. Obviously, if one firm is advertising its brands heavily, the others must also advertise to defend their market shares.

Do you think these firms would welcome congressional legislation which restricted the amount that any one firm could spend on advertising to $1 million yearly, and thereby allowed them all to drastically reduce their costs without fear of losing ground to each other? Are wireless telephone companies in the US market conducting the same practice of non-price competition? Explain your answer in both cases.

2) ”Most commercial fish species in nearly every ocean and sea are being rapidly depleted in what marine biologists and other specialists warn is evolving into 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 stocks of fish can sustain.” Assume that ocean fishing resembles a competitive market in the following ways…there are no significant barriers to entry and there are enough individual fishermen so that none of them can affect the market price of fish.

a) Explain why competitive markets normally lead profit maximizing firms to make choices about resource use that lead to an "efficient" allocation of resources to the market?

b) If unregulated competitive markets promote "efficient" patterns of resource use, why has unregulated competition led to such serious over allocation of resources to fishing?

A country that does not tax cigarettes is considering the introduction of a $0.40 per pack tax. The economic advisors to the country estimate the supply and demand curves for cigarettes as: QD = 140,000 - 25,000P; QS = 20,000 + 75,000P, where Q = daily sales in packs of cigarettes, and P = price per pack. The country has hired you to provide the following information regarding the cigarette market and the proposed tax.

b. What price and quantity would prevail after the imposition of the tax? What portion of the tax would be borne by buyers and sellers respectively?

c. Calculate the deadweight loss from the tax. Could the tax be justified despite the deadweight loss? What tax revenue will be generated?

100 word answer needed from article below:

Question:

Explain whether, and if so, you would expect laws that prohibit smoking in public places to affect the quantity of ciarettes traded in the market.

ARTICLE: Two ways to reduce the quantity of smoking demanded

Public policymakers often want to reduce the amount that people smoke because of smoking's adverse health affects. There are two ways that policy can attempt to achive this goal.

One way to reduce smoking is to shift the demand curve for cigarettes and other tobacco products. Public service announcements, mandatory health warnings on cigarette packets and the prohibition of cigarette advertising are all policies aimed at reducing the quantity of cigarettes demanded at any given price. If successful, these policies shift the demand curve or cigareetes to the left.

Alternatively, policymakers can try to raise the price of cigarettes. If the government taxes the anufacture of cigarettes, for example. cigarette companies pass much of this ta on to consumers in the form of higher prices. A higher price encourages smokers to reduce the amount of cigarettes they smoke. In this case, the reduced amount of smoking does not represent a shift in the demand curve. Instead, it represents a movement along the same demand curve to a point with a higher price and lwoer quantity.

How much does the amount of smoking respond to changes in the price of cigarettes? Economists have attempted to answer this question by studying what happens when the tax on cigarettes changes. They have found that a 10 per cent increase in the price causes a 4 per cent reduction in the quantity demanded. Teenagers are found to be especially sensitive to the price of cigarettes - a 10 per cent increasen in the price causes a 12 per cent drop in teenage smoking.

A related question is how the price of cigarettes affects the demand for illicit drugs, such as marijuana. Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes, so that high cigarette prices encourages marijuana use. By contrast, many experts on substance abuse view tobacco as a 'gateway drug' leading the young to experiment with other harmful substances. Most studies of the data are consistent with this view - they find that high cigarette prices are associated with reduced use of marijuana. In other words, tobacco and marijuana appear to be complements rather than substitutes.

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