PROBLEM Nt4 Market demand for a homogeneous good is given by D(p) = 8-p. The inc

Question

PROBLEM Nt4 Market demand for a homogeneous good is given by D(p) = 8-p. The incumbent firm's marginal cost is 4. There is a potential entrant to the market. Her marginal costs are constant and equal to c a) In the absence of the entry threat what would the price in this market be? ? Suppose that the game is as follows. First the incumbent firm sets the price. Then the entrant decides whether to enter the market and pay the entry cost of F. If the entry takes place, firm number 2 gets to set it's price. Because the good is homogeneous, consumers buy from the firm with the lowest price. If both prices are the same, consumers buy from the incumbent firm. (b) Will entry happen ifc 2 and F 2? (c) Is there a level of F for which entry uill be deterred when c = 3? Blockaded when c = 3? d) Suppose that F-1. Is entry going to be deterred, accommodated, or blockaded, when c 5?

Explanation / Answer

The major categories of firms that make up the U.S. financial services industry include:
commercial banks, thrifts, insurance companies, mutual fund companies, pension funds, and
securities related firms. Commercial banks and thrifts have declined in market share substantially
since 1980. In response they have offered a variety of new services, purchased or merged with
other institutions, and pushed Congress for regulatory reform.

The Wall Street Reform and Consumer Protection Act, signed by President Obama in July 2010, will do much to rein in the problems Sen. Levin identified in the four investigative hearings. It will rebuild the firewall between the worst high-risk excesses of Wall Street and the jobs and homes and futures of ordinary Americans by ending the era of lax regulation and returning a watchdog to Wall Street.

Now that Congress has passed strong new Wall Street reform legislation, it is up to federal regulators to enforce the law. If they adopt weak rules, or enforce them weakly, the reforms won’t work, and the economy and taxpayers will remain vulnerable to a repeat of the Wall Street abuses and excesses that helped throw the economy into recession.

One key battle is how regulators will implement and enforce the protections against risky financial trading and conflicts of interest – protections that Sen. Jeff Merkley of Oregon and Sen. Levin fought to include in the Wall Street reform bill.

Sen. Levin is closely following the rule-making process of the regulatory agencies charged with enforcing the Wall Street Reform and Consumer Protection Act. He has authored several letters (listed below) to the responsible agencies and has joined with Sen. Merkley and others in pushing the regulators to energetically implement the law.

A detailed description of the four April 2010 hearings on Wall Street and the Financial Crisis and links to associated information can be found after the letters to agencies.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.