Foundations of Economics, Student Value Edition (8th Edition)
Foundations of Economics, Student Value Edition (8th Edition)
8th Edition
ISBN: 9780134489230
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 2, Problem 1IAPA
To determine

To explain:

The reason for Company B to not manufacture the component of Product D at its own factory.

To determine

To explain:

The changes that can occur in the three economic questions, if Company B manufactures all the components of the Product D at its own factories in the US.

To determine

Few tradeoffs that Company B would face in making the Product D.

To determine

To explain:

The reason for Company B's decisions of making Product D could be in social interest.

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The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 8 MC ATC MR 30 D 45 50 Quantity/time The firm will maximize its profit at a quantity of units. After choosing the profit maximizing quantity, the firm will charge a price of The firm will receive $ in revenue at the profit-maximizing quantity. The total cost of production for this profit-maximizing quantity is S The maximum profit the firm can earn in this situation is $ per unit for this output. How will the situation change over time? Profits will attract rival firms into the market until the profit-maximizing price falls to the level of per-unit cost. ◇ Losses will induce firms to leave this market until the profit maximizing price falls to zero. The market will adjust until the price charged by this firm no longer exceeds marginal cost at the profit-maximizing quantity. This market is already in long-run equilibrium, and will not…
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