Question

1. Evaluate the following statement


A. “Managers should specialize by acquiring only the tools needed to operate in a particular market structure. That is, managers should specialize in managing either a perfectly competitive, monopoly, monopolistically competitive, or oligopoly firm.”



B. The CEO of a major automaker overheard one of its division managers make the following statement regarding the firm’s production plans: “In order to maximize profits, it is essential that we operate at the minimum point of our average total cost curve.” If you were the CEO of the automaker, would you praise or chastise the manager? Explain.




C. You are the manager of a small pharmaceutical company that received a patent on a new drug three years ago. Despite strong sales (GH¢125 million last year) and a low marginal cost of producing the product (GH¢0.25 per pill), your company has yet to show a profit from selling the drug. This is, in part, due to the fact that the company spent GH¢1.2 billion developing the drug and obtaining Food and Drugs Authority approval. An economist has estimated that, at the current price of GH¢1.25 per pill, the own price elasticity of demand for the drug is -2.5. Based on this information, what can you do to boost profits? Explain.



D. The opening statement on the Website of the Organization of Petroleum Exporting Countries (OPEC) says, “...OPEC’s eleven members are all developing countries whose economies are heavily reliant on oil export revenues. They therefore seek stable oil prices that are fair and reasonable for both producers and consumers of oil.” To achieve this goal, OPEC attempts to coordinate and unify petroleum policies by raising or lowering their collective oil production. However, increased production by Russia, Oman, Mexico, Norway, and other non-OPEC countries has caused the price of crude oil to fall dramatically in recent years. To achieve its goal of stable and fair oil prices, what must OPEC do to maintain the price of oil at its desired level? Do you think this will be easy for OPEC to do? Explain.

Answer 1

A)

Nowadays with a growing number of industries, the competition has also grown manifold so therefore in order to survive and conquer the market one needs to highly specialised in his work. The core competency is the deciding factor about your faith in the market.

Specialisation ​​​​​​ is key to good performance for any organisation and this is achieved to highly specialised managers.

why the manager should seek for specialisation in a particular market type?

• To tackle with cutthroat competition.
• Different markets have different strategies to earn profits.
• The different market follows different laws as in perfect competition market as the price taker whereas in the case of a monopoly market the firm is a price maker.
• The cost of operation or initial cost associated with the different market is different.

B) working at a minimum point of average total cost in order to increase profit is not a good idea.

As the quality of the product will be compromised which eventually affect the organisation goodwill.

C) We should trim more profit margin.

Or we can keep the same prices but opt for heavy marketing strategies.

D) No, it won't be easy for OPEC to do so. As other nations are out of reach of OPEC. And the organisation itself is facing a crisis as recently there long term associate Qatar left the OPEC.

What OPEC can do:-

• Give incentives to purchasing country.
• Should work on capturing the market.

​the