Managerial Economics Managerial Decisions in Competitive Markets 1. Suppose you own a home remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect to happen to (a) Your firm’s costs of production?…
The cost of production is dependent on the materials the firms choose. In this case the building materials are the materials for production. It is to be noted that the firm is earning short run profits which are the driver of new firms into the market. As new firms enter into the market, the demand for the materials for production will rise. The chosen firm will also have to buy the materials at higher costs and therefore, the costs of production will rise (United Nations Department of Agriculture, n.d.). b) The price that the chosen firm charges for their services will depend on two major factors: the competition that the firm faces from other competitors and the real estate market. As there is entry of new firms into the market, there is increased competition which will tend to force the equilibrium price down. Therefore, the chosen firm will be forced to charge less for the remodeling services. c) From the above two discussions it is clear that the firm will have to face increased competition and the costs of production will also increase. When new entrants appear in the market, the share of each of the other firms operating within the same industry decreases. As a result, the profits of the chosen firm will decrease. The firm will now enjoy only normal profits. Managerial Decisions for Firms with Market Power 2. ...
How? What evidence might you bring to the hearing? Answer: The Federal Trade Commission is concerned that the merger increased the market power for the firms that merged. However, it is difficult to argue that the market power will not increase if it is assumed that the rivals are close to the size of the merged firms. But it can be argued that the merger was simply aimed to save costs. Suppose the individual firms had to incur some overhead costs while operating as individual units. If it can be argued that increasing market power was not the aim of the merger and if it can be proved that the overhead costs have really decreased while operating as a merged company, then it will provide a foothold in the argument. The concentration of market power will also help to derive the price elasticity of demand. It can also be argued that the market power will not increase as much as in a situation of monopoly and would lack the power to hurt the consumers. In an industry characterized by firms that enjoy similar market shares, it is unlikely that the market power will increase as a result of the merger. The search engine market power tremendously increased because of the deal between Microsoft and Yahoo. The deal was allowed as Google enjoyed a fair power of the market. If the deal would not have taken place, both companies would have began to lose market power which could have hurt the consumers. Strategic Decision Making in Oligopoly Market 3. When McDonald’s Corp reduced the price of its Big Mac by 75 percent if customers also purchased French fries and a soft drink, The Wall Street Journal reported that the company was hoping the novel promotion would revive its U.S. sales growth. It didn’t. Within two weeks sales had fallen. Using your knowledge of game theory, ...
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Once the company begins to receive more profit, it plans to expand its business in other niches like business process outsourcing to assist other companies in business operations. The present dilemma is the economic costs that the company might experience, as it focuses on the plans for the promotion of the new packages.
yet only 7.3 million or only 23.6 percent of them uses hearing aids. It will be interesting to find out why it is so. Hearing aid is not yet so full proof a device to equate it with refractive lenses used to correct the vision of eyes. So as to say, no hearing aid restores the hearing in a most natural manner.
In the past decade the percentage of air travel has enhanced by almost 7% per annum. All over the world travelling in business and leisure purposes have increased manifold. In the last year the scheduled airlines carried approximately 1.5 billion passengers.
Managerial economics is based on the assumption that formulation of logical managerial decision is possible. Managers are enabled to make rational decisions, their decisions become imperative component of organization success. Concepts of the game theory and behavioral theory, that facilitate process of decision-making is considered in the paper.
The present study on the aspect of a comparison between hiring of a new employee or a temporary employee shows that while short term costs are lower for hiring a temporary employee, however considering the opportunity costs of a temporary employee and the value enhancement offered by a full time permanent employee, it seems the latter one is a better option for the organization.
Renewable resources include water, air, etc, while non-renewable ones are inclusive of fossil fuels. Artificial resources on the other hand, are man-made ones and might include a factory building. b) The productivities of factors of production are often considered to be enhanced with the availability of resources in the economy, since industrial production is a direct positive function of growth in natural resource component as well and hikes in industrial production assists in enhancing factor productivity.
Macroenvironmental studies point that India has maintained a steady and attractive GDP growth rate over the last years and hence India is potential place for investment despite its growing political instability and corruption. A partial debt financing is recomendable for the company to start its new division in India because this financing strategy is particularly better in the context of a recovering global economy.
The competitive market yields a total surplus equals to A & B in Figure 1. The above equlibrium level only yields C&D because in that case price is too low so suppliers will only supply until Q1. The below-equilibrium level of output is associated with a very high price, therefore as shown in Figure 3 consumers will only demand up to Q2 and yields total surplus equals to E&F.
Ceterus paribus is an omnibus assumption and holds all other factors which might influence consumer's demand as constant for the purpose of analysis. These factors may include income of the consumer, tastes of the consumer, impact of fashion and style, peculiar consumer characteristics like miserliness, scarcity of good and other choice patterns in consumer behaviour.Under these assumptions the price and quantity demanded are shown as inversely related and the graphical representation of consumer data in this scenario results in a downward sloping demand curve.
However, the issue is, with investment opportunities that are available becoming more global and diverse in nature, both in the territories sense as well as business sectors sense, it has become difficult to decide not only which companies but also
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