
Profit maximization by all the businesses in Company U.

Explanation of Solution
The profit is the excess revenue made by the firm after deducting the total cost of production from the total revenue made by the firm through the sale of the goods and services in the market. The firms in the imperfectly competitive market will be attracted toward the maximization of the profit in the market and thus, they would work toward the actions that maximize the profits for the businesses.
Even though the main objective of every firm under the imperfectly competitive market is to maximize their profit, the firms cannot always work for maximizing their profits in the US economy. There are many internal monitoring issues with every firm and these internal monitoring issues make the managers of the firm to look away from the profit maximization principle and might waste the profit potential on high priced benefits for themselves, which leads to the inefficiency in the production. When the inefficiency increases above the market limit, the firm might go out of business due to the loss. Thus, it is not necessary that the businesses in the US would always maximize their profit in the US economy.
Want to see more full solutions like this?
Chapter 16 Solutions
MICROECONOMICS (LL)-W/ACCESS >CUSTOM<
- Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve. (Hint: Show that learning by doing lowers its cost in the second period.) Part 2 Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash equilibrium?arrow_forwardAnswerarrow_forwardM” method Given the following model, solve by the method of “M”. (see image)arrow_forward
- As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.arrow_forwardPublished in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.arrow_forwardThe following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.arrow_forward
- Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub CoExploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
- Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning





