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 1.1PA

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

Before the Civil War, the South traded with the North and with England. The South sold cotton and bought manufactured goods and food. During the war, one of President Lincoln's first actions was a blockade of the ports in the South to prevent this trade. The South had to increase its production of munitions and food. Draw a point to show the South's production point prior to the Civil War. Label it 1. Draw a point to show the South's consumption point prior to the Civil War. Label it 2. During the war, the South's factors of production were severely depleted and its production possibilities decreased. Draw a curve that shows the effects of the Civil War on the South's PPF. Label it PPF₁. Draw a point to show the South's production point during the Civil War. Label it 3. During the war, the South did not engage in trade. Draw a point to show the South's consumption point during the Civil War. Label it 4. 100 80- 60- Other goods and services (units) ☑ 40- 20- 200 400 600 PPF 800 1000…

Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second by $9, the third by $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $3.50. Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following table, fill in the marginal revenue, total cost, and total…

Planes frequently push back from the gate on time, but then wait 2 feet away from the gate until it is time to queue up for takeoff. This increases fuel consumption and increases the time that passengers must sit in a cramped plane awaiting takeoff. The following table shows the pay schedule for the flight crew. Pay Per diem Holding pay per hour Flight Attendant Captain First Officer $3 $3 $3 $20 $20 $20 Hourly wage (after push back) $38 $184 $50 Per diem pay indicates how much the flight crew earns once it checks into the airport. Holding pay indicates how much the flight crew earns after it loads the plane. Hourly wage indicates how much the flight crew earns after it pushes back from the gate and turns on the beacon. In this scenario, who does not have an incentive to push back from the gate as early as possible? Check all that apply. Captain Flight attendants Passengers First officer True or False: Allowing the airline to decide when to push back from the gate would reduce…

Answer 2

Question

Chapter 9, Problem 1.1PA

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 1.1PA

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 1.1PA

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 1.1PA

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 1.1PA

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 1.1PA

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.