entry game. Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard", firm B ensures that firm A makes a loss of $1 million, but firm B only makes $1 million in profits. On the other hand, if firm B plays "soft", the
are two extreme cases of market structure. In reality, there are markets having large number of producers competing with each other in order to sell their product in the market. Thus, there is monopoly on the one hand and perfect competition, on the other hand. Such a mixture of monopoly and perfect competition is called monopolistic competition. It is a case of imperfect competition. The model of monopolistic competition describes a common market structure in which firms have many competitors, but
The Department of Marketing Mc Donald’s Marketing Strategies in the U.S Topic: McDonald’s Marketing Strategies in the US Introduction………………………………………………………………………………3 Chapter One: Fast Food Industry Analysis 1.1 Rivalry Among Existing Firms……………………………………………………….4 1.2 Threat of New Entrants………………………………………………………………5 1.3 Bargaining Power of Buyers…………………………………………………………6 1.4 Bargaining Power of Suppliers………………………………………………………7 1.5 Threat of Substitute
6. Marginal cost rises because of the diminishing marginal products. The ATC is in a parabola because the firm can add fixed cost on to the additional cost. Then both marginal cost and ATC, comes together in the min of ATC. Problems and Applications 3a. At 0hr, the marginal product is at 0. 1hr, marginal product is at 10. 2 hours, marginal product is at 8. 3 hours, marginal product is at 6. 4 hours, marginal product is at 4. 5 hours, marginal
major objectives of a firm. Profit-motive is the driving-force behind all business activities of a company. It is the primary measure of success or failure of a firm in the market. Profit earning capacity indicates the position, performance and status of a firm in the market. In spite of several changes and development of several alternative objectives, profit maximization has remained as one of the single most important objectives of the firm even today. Both small and large firms consistently make
√ Principles are expressed as the tendencies of typical or average consumers, workers, or business firms √ Generalizations • “Other things equal” assumption—controlling all variables except one • Abstractions—do not mirror the complexity of real world • Graphic Expressions—models used to show theory Policy Economics √ Applied Economics that recognizes
NATIONAL QUALIFICATIONS CURRICULUM SUPPORT Economics Microeconomics The Theories of the Firm [ADVANCED HIGHER] αβχ Acknowledgements This document is produced by Learning and Teaching Scotland as part of the National Qualifications support programme for Economics. First published 2002 Electronic version 2002 © Learning and Teaching Scotland 2002 This publication may be reproduced in whole or in part for educational purposes by educational establishments
where its demand curve is elastic. Question 2 10 out of 10 points Suppose a firm is currently maximizing its profits (i.e., following the MR=MC rule). Assuming that it wants to continue maximizing its profits, if its fixed costs increase, it should Answer Selected Answer: maintain the same price. Correct Answer: maintain the same price. Question 3 10 out of 10 points A firm that seeks to maximize its revenue is most likely to adhere to which of the
of this report is to introduce four market structures – perfect competition, monopoly, monopolistic competition and oligopoly, and their determinations of price and output. It also discussed the possibility for firms to generate profits in the short-run and/or in the long-run within these four market structures. It will be shown in the discussion that both monopolistic and oligopolistic firms are able to generate profits in both short-run and long-run, while firms in perfect competition and monopolistic
profit the firm should decrease output. B) to maximise profit the firm should continue to produce the