Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 15, Problem 1.5CE
To determine

To find: Whether multiyear fee for service is applicable or not.

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Forey, Inc., competes against many other firms in a highly competitive industry. Over the last decade, several firms have entered this industry and, as a consequence, Forey is earning a reLurn on investment that roughly equals the interest rate. Furthermore, the four-firm concentration ratio and the Herfindahl-Hirschman index are both quite small, but the Rothschild index is significantly greater than zero. Based on this informa­tion, which market structure best characterizes the industry in which Forey competes? Explain.
Alibaba is a Chinese e-commerce firm similar to Amazon.com in the United States. It has increased its power and global influence with strong leadership from its founder, including knowing when to acquire other organizations. For instance, in addition to acting as a platform for buyers to purchase products, it also acquired firms in the delivery and payments industries so it would have more control over the entire process. Alibaba's acquisitions are an example of   a) full-line forcing. b) vertical channel integration. c) channel cooperation. d) horizontal channel integration. e) digital distribution.
LalaFast 21 is a major carrier based in the Philippines and has made a strategy of cutting fares drastically on certain routes with large effects on traffic in those markets. For example, on the Baguio-Cubao route the entry of LalaFast into the market caused average fares to fall by 48 per cent and increased market revenue from P21,327,008 to P47,064,782 annually. On the Tuguegarao-Caloocan route, however, the average fare cut in the market when LalaFaST entered was 70 per cent and market revenue fell from an annual P66,201,553 to P33,101,514.Questions1. Calculate the PEDs for the Baguio-Cubao route and Tuguegarao-Caloocan route.2. Explain why the above market elasticities might not apply specifically to Lalafast 21.3. If LalaFast 21 does experience a highly elastic demand on the Baguio-Cubao route, what is the profit implication of this?4. Explain why the fare reduction on the Tuguegarao-Caloocan route a profitable strategy for LalaFast may still be.
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