MYECONLAB+ETEXT+KNAPP 104 STUDENT PACKET
MYECONLAB+ETEXT+KNAPP 104 STUDENT PACKET
6th Edition
ISBN: 9781323477816
Author: HUBBARD/KNAPP
Publisher: PEARSON C
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Chapter 13, Problem 13.5.5PA
To determine

Reason for give up free advertising by removing the logos.

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For each of the following pairs of firms, explain which firm would be more likely to engage in advertising and why.   a.  a family owned farm or a family owned restaurant b.  a manufacturer of forklifts or a manufacturer of cars c.  a company that invented a very comfortable razor or a company that invented a less comfortable razor
Raphael's hair salon is a monopoly in a small town and is currently earning an economic profit.  a) Does Raphael's hair salon produce the allocatively efficient quantity? Explain. b) Assume that Raphael signs a new lease with an increase in rent, a fixed cost. Will the price of haircuts provided by Raphael increase, decrease, or stay the same in the short run? Explain. c) Assume that new hair salons enter the market and that the market becomes monopolistically competitive. In long-run equilibrium, will Raphael's hair salon produce the productively efficient quantity? Explain.
When oil prices increased 10 fold during the 1973 – 80 energy crisis, many oil companies made huge profits. During this energy crisis, Congress considered imposing an “excess profits” tax on oil companies. If you were in Congress, would you vote for such a tax? Do unexpected monopolistic profits serve any useful function in a market economy?
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