MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 16.1, Problem 1Q
To determine

Meaning of the phrase “competition is for losers�.

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Three managers of the Magic Potion Company are discussing a possible increase in production. Each suggests a way to make this decision. HARRY: We should examine whether our company’s productivity—gallons of potion per worker—would rise or fall. RON: We should examine whether our average cost—cost per worker—would rise or fall. HERMIONE: We should examine whether the extra revenue from selling the additional potion would be greater or smaller than the extra costs. Who do you think is right? Why?
In an article about the financial problems of USA Today, Newsweek reported that the paper was losing about $20 million a year. A Wall Street analyst said that the paper should raise its price from 50 cents to 75 cents, which he estimated would bring in an additional $65 million a year. The paper’s publisher rejected the idea, saying that circulation could drop sharply after a price increase, citing The Wall Street Journal’s experience after it increased its price to 75 cents. 1- What implicit assumptions are the publisher and the analyst making about price elasticity?
Read summary about the hula hoop scence: The Hudsucker Corporation has decided to sell the hula hoop for $1.79. We see the toy store owner leaning next to the front door waiting for customers to enter but customers are non-existent. Next, the movie cuts to the president of the company, played by Tim Robbins, and we see him sitting behind a big desk waiting to hear how the launch of the hula hoop is going. It does not go well. The price starts to drop, first to $1.59, then $1.49 and so on down until the hula hoop is "free with any purchase." Even this is not enough to attract consumers. So the toy store owner throws the hula hoops out into the alley behind the store. At his point, it is a fluke that changes the direction of the entire movie. When the hula hoops are tossed into the alley one of them rolls across the street and around the block before landing at the foot of a boy who is skipping school. He picks up the hula hoop and tries it out. He is a natural. About this time school…
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