Toyota decides to locate a new manufacturing plant in Southern Illinois because that region of the U.S. is where most of the major auto parts vendors have traditionally been located. This example illustrates which concept associated with the business-to- business market? The difficulty associated with business A buying decisions The geographic concentration and/or clustering of similar industries Businesses purchase in large volume/ C quantities Business demand is based on consumer D demand B

Toyota decides to locate a new manufacturing plant in Southern Illinois because that region of the U.S. is where most of the major auto parts vendors have traditionally been located. This example illustrates which concept associated with the business-to- business market? The difficulty associated with business A buying decisions The geographic concentration and/or clustering of similar industries Businesses purchase in large volume/ C quantities Business demand is based on consumer D demand B

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 16CTQ: Would you rather have efficiency or variety? That is, one opportunity cost of the variety of...

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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
1. DIHL Co. isa Danao-based logisiCs company owned by Engr. Donaid H. Lalican. Antcipating the growing demand for delivery services, he developed a strategic plan for the year 2022. The options are to hire additional delivery crews in their Mandaue facility, construct a new facity in Talisay City, or subcontract Ohiala Move, a smal-time company. A study conducted by the marketing department forecasted the following payoff values, which are summartzed in the tabie below. The values are expressed as gains and alpha = 0.6. What decision will Engr. Lalcan make using the different criteria under conditions of uncertainty. Question is what is the worst possible decision he will make? States of Nature Decision Alternatives Failure Low Moderate High Hire additional Drivers in Mandaue 450,000 250,000 250,000 500,000 Construct a facility in Talisay 800,000 400,000 300,000 700,000 Subcontracting Ohlala Move 100,000 10,000 150,000 300,000
. When Chinese automakers began exporting cars, rather thanfocusing on developed nations in the West, they shippedautos to emerging markets in countries such as Algeria, Russia,Chile, and South Africa. In these markets, even used vehiclesfrom multinational manufacturers are relatively scarce—andrelatively expensive. The Chinese automakers, who prioritizelow cost rather than design or even safety, applied a penetration-pricing strategy. A woman in Santiago, Chile, who boughta new Chery S21 explained, “The price factor is fairly decisive.I paid $5,500 new and full. Toyota with similar features costsaround $12,000.” Why do you think Chinese automakerschose that pricing strategy? Do you think it was successful?As Chinese regulators pressure these manufacturers to maketheir cars safer, do you think they will be able to keep theirprices low compared with those of the international automakers? Why or why not?26
A large share of the world supply of diamondscomes from Russia and South Africa. Suppose thatthe marginal cost of mining diamonds is constant at$1,000 per diamond and the demand for diamonds isdescribed by the following schedule:Price Quantity$8,000 5,000 diamonds7,000 6,0006,000 7,0005,000 8,0004,000 9,0003,000 10,0002,000 11,0001,000 12,000a. If there were many suppliers of diamonds, whatwould be the price and quantity?b. If there were only one supplier of diamonds, whatwould be the price and quantity?c. If Russia and South Africa formed a cartel, whatwould be the price and quantity? If the countriessplit the market evenly, what would be SouthAfrica’s production and profit? What wouldhappen to South Africa’s profit if it increased itsproduction by 1,000 while Russia stuck to thecartel agreement?d. Use your answers to part (c) to explain why cartelagreements are often not successful.
4. You have been hired as a consultant to estimate the demand for various brands ofcoffee in the market. You are provided with annual price data for two years by U.S.state and the quantities sold. You want to estimate a demand function for coffeeusing this data. What problems do you think you will encounter if you estimatedthe demand equation by OLS?
Critical Thinking Cost-plus pricing used to be the mostcommon approach to setting prices in the marketplace. Ithas the advantages of being simple and ensuring that aprofit margin is achieved on every unit sold. However, ashighlighted in the chapter, there are alternative approaches to setting prices.Do you think that cost-plus pricing is still applicablein today’s world, or are there more suitable approachesto setting prices? For what type of products or industries do you think cost-plus pricing can still be used effectively?
The Private Express Statutes, passed in 1792 and (in amended form) still in effect today, contain federal civil and criminal laws relating to the delivery of mail. The statutes grant monopoly powers to the U.S. Postal Service. Given the technology available today, the average effect of this monopoly on the price and quality of mail service in the populated parts of the United States is that the __ because of the monopoly privilege of the USPS. O price is higher and the quality of service is lower O price is lower and the quality of service is higher O price and quality of service are lower O price and quality of service are higher
You own a printing firm. Two of yoursenior managers provide you with advice. Thefirst manager states that your company islosing money for every unit that is printed. Tominimize losses, she advises that you reduceyour production levels. The second managerstates that if your firm sells some more units,the price will cover your increase in costs. Inorder to reduce losses, the second managerrecommends that you should increaseproduction. Explain which manager iscorrect and who is offering the correctadvice?
In the world market for copper, there are two types of copper mines: Type 1 (primarily locatedin North America) and Type 2 (primarily located in Asia and South America). Each type of mineincurs five “buckets” of costs: (1) direct materials; (2) energy inputs (such as electricity andnatural gas); (3) shipping; (4) production labor; and (5) production and administrative overhead.Direct materials, energy inputs, and shipping services are purchased in competitive spotmarkets, and the total monthly costs that a firm incurs on these items vary in direct linearproportion to the quantity of copper produced in the mine during that month. If a mineproduces no copper in a particular month, it incurs no direct materials, energy, or shippingcosts.By contrast, the total monthly costs for production labor and overhead are volume- insensitive:the levels of these costs do not vary with the volume of production in the mine. Even if themine temporarily suspended operations for a month (i.e., produced…
Cape Town and Durban were first developed in the 17th and 18th centuries as trading posts on theshipping route between Western Europe and Asia. During the 19th century, this role changed withthe discovery of diamonds and gold in the interior. The port cities developed from being stop-overand service points providing shipping services, to being ports through which commodities weretraded.”The change in the that occurred in the Durban and Cape Town ports during the 19th century is best explained by…a) A movement along the production possibilities frontier.b) A movement towards the production possibilities frontierc) An outward movement of the production possibilities frontierd) An inward movement of the production possibilities frontier
Igrushka is a profit-maximizing firm producing wooden dolls-a capital-intensive good-which are sold in its home country, Russia, and abroad in France. Igrushka chose foreign production as a method of penetrating the French market and has to decide whether it is more efficient to directly invest in France to establish a production subsidiary or to license the technology to a French firm to produce its goods. On the following graph, AVCFrance is the average variable cost curve of a French firm producing wooden dolls. (This curve represents costs such as labor and materials.) The curve ATCSubsidiary represents the total unit costs Igrushka will face if it establishes a subsidiary in France. PER-UNIT COST (Dollars) 10 9 8 1 0 0 ATC 15 Subsidiary 30 45 60 75 90 105 120 PRODUCT (Thousands) AVC France 135 150 ? 4
COURSE: MICROECONOMICS - Bertrand's ModelAssume that a market is supplied by 2 companies, whose total costs are: CTi = 100Respective demand of each is: q1 = 120 - 2p1 + p2 and q2 = 120 - 2p2 + p1It is requested to:(a) calculate the firms' profit and reaction function.(b) plot the market equilibrium price and reaction function(d) calculate equilibrium quantity produced by each firm(e) determine profits that both firms will have at equilibrium.