Economies of scale as a barrier to entry. Concept Introduction: Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

3. Consider the market for paper. The process of producing paper creates pollution. Assume that the marginal damage function for pollution is given by: MDF = 3E where damages are measured in dollars and E is the level of emissions. Assume further that the function describing the marginal abatement cost of emissions is given by MAC 120-E where benefits are measured in dollars and E is the level of emissions. a. Graph the marginal damage function (MDF) and the marginal abatement cost function (MAC). b. What is the unregulated level of emissions Eu? What is the social welfare of this emissions level? c. Assume an existing emission quota limits emissions to E = 60. Show on the graph why this policy is inefficient. What is the deadweight loss caused by this policy?

show written calculation for B

Problem 1: 1. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 5%? 2. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 8%? 3. If a stock is expected to pay an annual dividend of $20 this year, what is the approximate present value of the stock, given that the discount rate is 8% and dividends are expected to grow at a rate of 2% per year?

Answer 2

Question

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Answer 6

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Answer 7

Chapter 9, Problem 1.1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Answer 8

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.