Managerial Economics Chapter 9 Essay

(5 points) Upward sloping supply curves imply that some firms would still produce the product if the price were lower. Does this imply that some firms in such an industry must be making economic profits? Explain. (Note: you might want to read pp. 256-259 of the textbook for help in answering this question.)

In a monopolistically competitive industry, the goods sold, while not perfect substitutes, can be viewed as acceptable substitutes by most people. As a result, if Firm A raised the price of its good substantially, consumers would decrease the quantity demanded from Firm A and would move to other firms selling similar products. As a result, Firm A would sell few units at the new higher price. As the quantity a firm sells falls, so does its percentage of sales in the industry, also

An estimated regression coefficient is 10 with a standard error of 5. The null hypothesis is that the partial regression coefficient equals zero. What is the value of the t-statistic for testing the null hypothesis of the regression coefficient?

In some industries, there are no substitutes and there is no competition. In a market that has only one or few suppliers of a good or service, the producer can control price, meaning that a consumer does not have choice, cannot maximize his or her total utility and

The cost-efficiency implies that the company introduces changes that allow the company saving costs without harmful effects of such changes on the quality of products and services of the company. For instance, the company can optimize internal business processes through their automation (Clarke, 2000). The automation of internal business processes saves time of employees which they can use more effectively, for instance, to increase their productivity. In such a way, the company enhances its performance and increases its revenues while its costs drop.

If market demand increases, price is bid up and economic profits are made in the short run. These economic profits attract new firms to the market, and existing firms may expand. But to produce their output, firms need resources. If the total demand for resources increases significantly, resource prices are bid up for each firm in the industry. This causes an upward shift of the average total cost curve, consistent with a higher equilibrium price at the point of zero profit.

20. (Perfect Competition and Efficiency) Define productive efficiency and allocative efficiency. What conditions must be met to achieve them?

Going back to the four types of market structures we can now say that our company is approaching a monopolistic competition structure, in which there are still many buyers and sellers of products, but we have set ourselves apart from our competition with our innovations and there is no longer perfect substitution of products (Harris, McGuigan, Moyer, 2014, p. 352). In this type of structure a firm can earn profits, break even, or suffer losses. In the short run a new entrant into the

In a perfectly competitive market each firm is a “Price Taker” , i.e. the prices and wages are determined by the market and the firm is so small relative to the size of the market that they can have no influence over the market price. For a market to be

In this scenario, the Tapese people of the island of Tap are being exposed to two market structures, perfect competition and a monopoly. A perfectly competitive market is a hypothetical market where competition is at its greatest possible level and some key characteristics of a perfectly competitive market are, many buyers and sellers, a homogeneous product, which is one that cannot be distinguished from competing products from different suppliers. In other words, the product has essentially the same physical characteristics and quality as similar products from other suppliers. Furthermore, a perfectly competitive market has perfect information, they are price takers, and there are no barriers to entry. With perfect information in a market,

Result of this inefficiency, higher prices will be charged to consumers. Figure 1.2 shows a monopolist’s is pricing will above the average costs thus making a supernormal profit. In addition to these problems, monopolies may make the demand curve their own and lack the incentive to introduce new products and varieties. In other words they don’t satisfy consumers wants and it is likely that they still earn supernormal profits.

A monopoly is the opposite of perfect competition (Fontinelle). It’s the type of market structure where there is no

Moving forward, another important aspect of a commercial society which is the laws of supply and demand. Supply is simply how much stock a person has, to sell. Demand is what people desire in their lives. Both supply and demand can fluctuate going up or down but it is ideal for the two to have an equilibrium. This is because supply and demand are hinged off the ideas of natural price and market price. Natural price is the cost of making a product,

The structure of a market is defined by the number of firms in the market, the existence or otherwise of barriers to entry of new firms, and the interdependence among firms in determining pricing and output to maximize profits. The author of this paper will cover: the advantages and limitation of supply and demand identified in the simulation, the effectiveness of the organization in which the author knows, and how the organizations in each market structure maximizes profits.

Q.1) “Inferior goods are not those goods in case of which the law of demand fails, inferior goods are those goods in case of which income effect is negative or these are the goods the demand for which decreases when income increases