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.

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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.

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C1 The following model can be used to study whether campaign expenditures affect election outcomes: voteA = 0 + B₁ log(expendA) + ẞ₂ log(expendB) + ẞ3 prtystrA + u, where voteA is the percentage of the vote received by Candidate A, expendA and expend are campaign expenditures by Candidates A and B, and prtystrA is a measure of party strength for Candidate A (the percentage of the most recent presidential vote that went to A's party). == (i) (ii) (iii) (iv) What is the interpretation of B₁? In terms of the parameters, state the null hypothesis that a 1% increase in A's expenditures is offset by a 1% increase in B's expenditures. Estimate the given model using the data in VOTE1.DTA and report the results in usual form. Do A's expenditures affect the outcome? What about B's expenditures? Can you use these results to test the hypothesis in part (ii)? Estimate a model that directly gives the t statistic for testing the hypothesis in part (ii). What do you conclude? (Use a two-sided…

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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.

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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.

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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.

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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.