Essay on Competition and Unit Cost

If the companies share the market both the companies will have additional sales lower than the break-even sales resulting income lower than their current income. In such a case Steady will suffer far more losses. Low variable costs and hence lower contribution margins of Swing make the company more profitable in comparison to Steady for the sales of additional units. Since the market cannot be segmented, I would advise Swing to reduce its price and enter the market to acquire 40% additional sales. Steady should overlook the new market and continue selling to the current market without changing its price.

1. When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is ( )

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

So, to summarize with all the information given, Company A should always strive to have their marginal cost be equal to their marginal cost in order to maximize profit. If they see that their marginal revenue is higher than the marginal cost then more output needs to be produced to get their max profit. In contract, if the marginal cost if higher than the marginal revenue then output needs to

c) (4 pts.) The Nash equilibrium is for Westinghouse to set its price at __________ and earn a profit of __________ and for General Electric to set its price at ______________ and earn a profit of _____________.

At point F a monopoly firm attains equilibrium producing OM, output at OP, price. OP competitive price is less than OP, (OP < OP,) and OM competitive output is greater than OM, output (OM > OM,).

At the price of $5.00, the quantity supplied equals the quantity demanded. At a price of $7.00, the quantity demanded is 120 greeting cards and the quantity supplied is 160 greeting cards. There is a surplus of 40 greeting cards a week and the price falls. As the falls, the quantity demanded increases, the quantity supplied decreases, and the surplus decreases. The price falls until the surplus disappears. The market equilibrium occurs at a price of $5.00 and 140 cards a week so the price falls to $5.00 a greeting card.

a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph).

a. The product is identical (ie, aluminum), all the companies procure the same resources to make production with same production line and process. The firms only differentiate in terms of controlling and lowering the variable cost in order to make a profit as a price-takers. Pricing is somehow fix in global level as aluminum is openly traded in the financial market.

8. Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and output will be which of the following?

v. What are the limitations, if any, to the estimates of the profitability of the two customers? (Hint: Consider what improvements could be made to the accounting system to obtain more accurate costs)

production and sales of Product A is 2,000 units and of Product B is 3,000 units. There are three activity cost

1) According to the Law of Demand, the demand curve for a good will A) shift leftward when the price of the good increases. B) shift rightward when the price of the good increases. C) slope downward. D) slope upward. Answer: C 2) An increase in the price of pork will lead to A) a movement up along the demand curve. B) a movement down along the demand curve. C) a rightward shift of the demand curve. D) a leftward shift of the demand curve. Answer: A 3) An increase in consumer incomes will lead to A) a rightward shift of the demand curve for plasma TVs. B) a movement upward along the demand curve for plasma TVs. C) a rightward shift of the supply curve for plasma TVs. D) no change of the demand curve for plasma TVs. Answer:

Joseph Bertrand developed his oligopoly model 45 years after Cournot. Bertrand was the first major challenge to the theory Cournot developed, he argued that Cournots model failed to show how prices were set and by whom, as under his model firms set quantities not prices and no mechanism is explicitly stated for determining pricing (Carlton & Perloff, 2005). Bertrand’s model like Cournot follows the basic assumptions of oligopoly listed above alongside these that there are two firms in the market (duopoly), they sell identical products (homogenous), constant marginal costs (MC), blockaded entry and most importantly of all the firm believes its rivals prices are fixed. Consumers in the market will have complete information and therefore will purchase from the firm with the lowest price, which means if a firm lowers its price

* Each buyer is willing to pay $200 for one unit of the Incumbent’s (I) AND $160 for the Entrant’s (E) product