If the FTC is correct about Facebook, Facebook will be able to earn profits in the long-run. What characteristic of the market will allow Facebook to do this? Downward-sloping demand Barriers to entry The ability to mark up the price Differentiated products

If the FTC is correct about Facebook, Facebook will be able to earn profits in the long-run. What characteristic of the market will allow Facebook to do this? Downward-sloping demand Barriers to entry The ability to mark up the price Differentiated products

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 31P: Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as...

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Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as the incumbent tries to bleak into the market by selling 4,000 units of output. Estimate from the graph what the new firms average cost of producing output would be. If the incumbent continues. to produce 6,000 units, how much output would the two films supply to the market? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn? Figure 9.2 Economics of Scale and Natural Monoploy
Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…
Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…
Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…
Suppose you are the economic adviser ofa company producing three brands of mobile pnones;Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units ofNokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing directorproposes an increase in price of Samsung X from e800 to e1000 per unit for which quantitydemanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unitfor which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 unitsUsing the mid-polint formula. compute the price elasticity of demand for each brand.From your answer in i, what is the type and economic interpretatiom of each brand'sii.value of elasticity.
According to Professor Kosmos, the demand for hot chocolate from the university café has the schedule QD = 2500 – 135p, where p is the price. The owner of the café says that their supply schedule is QS = 1600 + 315p. i) Identify the café’s daily profit maximising price and quantity. ii) When a new hot chocolate machine is installed, the Professor finds that the supply schedule has changed to QS = 1625 + 365p. What are the café’s new daily profit maximising price and quantity? iii) Find the price elasticity of demand for the café’s hot chocolate and comment on the result.
In mid-2010, Saudi Arabia and Venezuela (both members of OPEC)produced an average of 8 million and 3 million barrels of oil a day,respectively. Production costs were about $20 per barrel, and the price ofoil averaged $80 per barrel. Each country had the capacity to producean extra 1 million barrels per day. At that time, it was estimated that each1-million-barrel increase in supply would depress the average price of oilby $10.a. Fill in the missing profit entries in the payoff table.b. What actions should each country take and why?Venezuela3 M barrels 4 M barrels8 M barrels _____, _____ _____, _____ Saudi Arabia9 M barrels _____, _____ _____, _____c10GameTheoryandCompetitiveStrategy.qxd 9/29/11 1:33 PM Page 430Summary 431c. Does the asymmetry in the countries’ sizes cause them to take differentattitudes toward expanding output? Explain why or why not. Commenton whether or not a prisoner’s dilemma is present.
Food prices in sports stadiums are notoriously high because there is a limit on the numberof vendors that can operate in the stadium, which is a barrier to entry. In 2017, the AtlantaFalcons, an American football team, lowered the barriers to entry by allowing more foodvendors into their stadium. If the market for food in the stadium follows our perfect marketassumptions, what might you expect happened after this change? Do not worry about theunderlying facts of each statement, only whether it makes economic sense given our model.(Select one or more.)(a) The price of food in the stadium decreased because of an increase in supply.(b) The price of food in the stadium decreased because of an increase in demand.(c) The quantity of food sold decreased because of a movement of the supply curve.(d) The quantity of food sold increased because of a movement along the demand curve.(e) Profit per vendor decreased because of lower food prices.(f) Profit per vendor increased because of greater…
A tuition agency hires tutors to teach students. The following table displays how total outputincreases as tutors increase.No. of Tutors 1 2 3 4 5Total No. ofStudents4 10 18 24 3Tutors cost $50 each regardless of how many students each tutor has. The agency paid $500 in non-refundablemarketing fees to set up the business as a fix cost. In the short run, considering the shut-down condition, whatis the lowest price per student Tom’s tuition agency can charge? Explain your answer.
If Kiesel experienced an increase in orders from its websiteover a period of two weeks, should it expand its productioncapacity to make sure it can handle increased demand inthe future? Why or why not?
Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to$50 and a fixed cost of $22,500. You are asked to advise the CEO as to what prices andquantities BMW should set for sales in Europe and in the United States to maximize its profits.The demand for BMWs in each market is given by:QE = 8,000 – 80PE and QU = 4,000 – 20 PU,where the subscript E denotes Europe, the subscript U denotes the United States. Assume thatBMW can restrict U.S. sales to authorized BMW dealers only. Support your answersgraphically as well.a. If, by an international agreement between Europe and United States, BMW wereforced to charge the same price in each market, what would be the quantity sold in eachmarket, the equilibrium price, and the company’s profit?b. Suppose now that Europe and United States signed a new trade package under whichBMW now can charge different prices across the two markets. What quantity of BMWsshould the firm sell in each market, and what should the price be…
No written by hand solution Suppose that headphones can be produced at a constant marginal cost. Headphone A is priced at $20 and headphone B is priced at $30. (a) If the Lerner index of headphone A divided by the Lerner index of headphone B is 0.5, what is the marginal cost of producing headphones? (b) Using your answer to part ‘a’, what is the elasticity of demand of headphone A? What is the elasticity of demand of headphone B?