Monopoly and Price Discrimination What we called monopoly is the sole seller if the product and that product do not have close substitutes. Monopoly can control the prices of their goods, but their profit is not limited because high prices reduce the amount that their consumers buy. The most important cause of monopoly is barriers to entry. The three main sources are owned by a single firm, the government gives a single firm the exclusive right to produce some good or services, and the cost of production makes a single producer more efficient than a large number of producers like the distribution of water. Monopoly is the sole producer in the market; its demand curve is the market demand.
Answer: C For an imperfectly competitive firm: A) total revenue is a straight, upsloping line because a firm's sales are independent of product price. B) the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. C) the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. D) the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold. Answer: C For a nondiscriminating imperfectly competitive firm: A) the marginal revenue curve lies above the demand curve.
The strong brand names possessed by UST, such as Copenhagen and Skoal, reduces the company's credit risk by creating a virtual monopoly in the premium smokeless tobacco market that is relatively immune to competition. In regards to the premium segment of the smokeless tobacco market, the company's current success is expected to continue. UST's cash flows are both high and stable, with relatively no cyclicality due to the inelastic nature of demand for tobacco products. As a tobacco product manufacturer, UST has a large amount of liquid and tangible resources in the form of their manufacturing assets. While there is the risk of litigation at UST, this risk is moderate compared to other tobacco companies, such as cigarette manufacturers.
The consumers are risk-neutral: if they have probability p of getting a high quality product, they value this prospect 14p + 8(1 - p) Each type of manufacturer can produce the product at a constant unit cost of 11. a) Suppose that the sale of low quality calculators is illegal, so that the only items allowed to appear on the market are of high quality. What will be the equilibrium price? b) Suppose that there are no high quality sellers. How many low quality calculators would you expect to be sold in equilibrium? c) Could there be an equilibrium in which equal (positive) quantities of the two types of calculators appear in the market?
The higher wages paid by the employer have to be made up somewhere. In a free market, if an employer is producing a commodity, he will inevitably try to use the fewest possible dollars to make the highest quality products. This means that he will hire the best workers he can, for the lowest wages he can. This enables him to hire more workers, thus creating jobs and decreasing unemployment. It also ensures that he can put a high quality product on the market at a relatively low price.
The company is over-liquid and has no debt, from which the shareholders are suffering because all acquisitions and investments are with high costs and low risks. BKI needs to create leverage by borrowing more, thus increase its ROI and ROE of its acquisitions and investments. At the moment Blain shows the lowest ROE in its sector (by far) while increasing its cost of capital, in other words the cash held remains unutilized and thus reduces the value of the company. Companies with low ROE are less attractive to investors. On the other hand, debt has a much lower cost of capita and provides a good opportunity to take on more
A) Profit = (12.50 – 10) X 1000 = $2500. As there exists positive economic profit in this perfectly competitive industry in the short run ( as the price exceeds the average total cost), new firms will be attracted to enter the industry. As new firms enter the industry, the total market production increases, this will bring down the market price and thus, result in a fall in profits. This entry of new firms will continue till the economic profits in the long run becomes equal to zero, after which there will be no incentive for any new firm to enter. 2.
Although the industry has faced a halt in sales growth, Brown-Forman is defying the odds of the market and is continuing to grow. These results exemplify that Brown-Forman are able to finance any acquisition and other investment opportunities, proving to be a perfect time to acquire Southern Comfort. Southern Comfort is viewed as unique liquor mixed by a secret formula which is exclusive to the owner’s of Southern Comfort producing a distinct flavour. Brown-Forman’s product-market philosophy is to only produce and sell high-quality products at premium prices, which are predominantly well known brands. Southern Comfort blends in with Brown-Forman’s philosophical view as it is a unique high quality product with a strong brand which has never been sold at a discount price by its manufacturer.
These findings were published in a 1992 paper titled "The Cross-Section of Expected Stock Returns". 2. DFA's business strategy centers on the core concept that markets are "efficient" that is that no one has the ability to consistently pick stocks that would beat the market. In addition, the founders of DFA believed that combining solid academic research with the abilities of skilled traders would complement each other to produce superior returns. DFA's Small Cap objective is to deliver the size effect (research has indicated that small companies provide higher expected returns than larger companies in the long term) and provide the diversification benefits of investing in small companies worldwide.
Such economies of scale will allow Berkshire to offset the very high costs of cold-forming equipment. Business StrategyA careful analysis is needed in order to determine Berkshire’s business strategy. At first one would think it was product differentiation because of the inelastic demand in the short run. But one thing that should also be noted is the fact that for most goods, demand is much more price elastic in the long run than in the short run. This combined with the fact that Berkshire is convinced that it could not individually raise prices without suffering substantial volume declines, and that all the products of the different manufacturers in the industry are very similar, prove that their business strategy is in fact cost leadership.