MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 7, Problem 4CACQ
a
To determine
Price charged from customers.
b)
To determine
The mark-up factor that the firm uses to mark-up its price over the marginal cost.
c)
To determine
Whether firm enjoys market power or not.
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Suppose that you are a manager for a firm like EBC Brakes, which manufactures brakes for automobiles and motorcycles. Your company has two plants, one in the United States and the other in the United Kingdom. The following tables include estimated demand and marginal revenue for your brakes, along with the marginal costs at the two factories.
what quantity and price maximize your firms profit?
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Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can
disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the
purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 20 firms.
PRICE (Dollars per pound)
100
90
80
70
80
50
40
30
20
10
0
0
125 250 375 500 825 750 875 1000 1125 1250
QUANTITY (Thousands of pounds)
Demand
Because you know that competitive firms earn
Supply (10 firms)
True
Supply (15 firms)
If there were 10 firms in this market, the short-run equilibrium price of rhodium would be $
would
. Therefore, in the long run, firms would
False
Supply (20 firms)
per pound. From the graph, you can see that this means there will be
?
per pound. At that price,…
A firm has $2.5 million in sales, a Lerner index of 0.50, and a marginal cost of$10, and competes against 100 other firms in its relevant market. By what factor does this firm mark up its price over marginal cost?
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