Question

In: Economics

For question number 15 give an explanation to the following scenarios. (9.5 pts) Scenario A: In...

For question number 15 give an explanation to the following scenarios. (9.5 pts)

Scenario A: In a monopoly market the lure of above-normal profits may give a firm an incentive to develop new products and technologies.

Scenario B: The rising demand for eclecticity in California during the year 2000 decreased the elasticity of demand for electricity generators, giving the generating companies an incentive to close down plane and send electricity prices soaring.

Scenario C: Why do monopolistic competitive firms use advertising to inform consumers about their products?

Scenario D: As more firms enter a monopolistic competitive market, why does the market demand curve stays the same?

Solutions

Expert Solution

(Scenario A)

A monopolist earns super-normal profits in short run if its price, derived by equality of MR and MC curves, lies above ATC curve. Market demand remaining unchanged, the lower the ATC, the higher the price, so firms have an incentive to develop new products to increase economies of scope, and new technologies to lower ATC, in order to increase profits.

(Scenario B)

A decrease in elasticity of demand means that demand has become more inelastic compared to earlier period. Therefore, if electricity companies close down plants and increase electricity price, consumers are now less price-sensitive than before (since demand is inelastic), therefore a rise in price will increase total revenue.

(Scenario C)

In monopolistic competition, there are numerous sellers in the market but each sells a slightly differentiated product, therefore they act as price setters. Advertising is a major tool of product differentiation by such firms.

(Scenario D)

Entry of new firms in monopolistically competitive market increases market supply, but market demand is not affected by new entry, which is solely a supply side factor. Market demand remains unchanged, but individual firm's demand falls.


Related Solutions

Problem Set 1: (15 pts) Research Scenario: The following scenario is based loosely on an actual...
Problem Set 1: (15 pts) Research Scenario: The following scenario is based loosely on an actual study conducted in 2013 by Ahn, Kim, and Aggarwal– please note that methods and data have been modified for educational purposes. Do you turn off the light when you leave the room? South Korean researchers wondered how they could increase the number of people who do by use of posters (Ahn, Kim, & Aggarwal, 2013). In one, an image of a light bulb was...
Case Studies: For each of the following scenarios, give a brief explanation of what you would...
Case Studies: For each of the following scenarios, give a brief explanation of what you would suggest, and why. You are working as a Nurse at a rural high school and have been asked to assess the body composition and overall health of the students. What specific body composition assessment technique would you use (consider price, ease of use, etc…)? Make sure you explain why you would choose this technique. (3 pts) You have been asked to give a presentation...
Question 1 1 pts (The following research scenario is the basis for all the questions in...
Question 1 1 pts (The following research scenario is the basis for all the questions in this assignment.) According to a Gallup survey from 2013, Americans sleep an average of 6.8 hours per night. I was curious whether sleep time is significantly different now (2018) compared to 2013. So I measured the sleep of 16 different people over a week, and came up with an average score for each person. I assume that the sleep time among all Americans is...
Supply and Demand (15 pts) For each scenario, explain in words or use a graph (if...
Supply and Demand (15 pts) For each scenario, explain in words or use a graph (if you choose to use a graph, it must be completely labeled [ie - Q1, Q2, D1, D2, etc] ) to show how the demand and/or supply curve would shift and/or move along their respective curve. Make sure to clarify which market you are using. (a) Jelly market during the month of June. (b) Milk goes on sale in the weekly grocery ad. c) Gillette...
Give more details on the following answer Question: Give a detailed explanation about what is happening...
Give more details on the following answer Question: Give a detailed explanation about what is happening with the oil prices. mention coronavirus, OPEC, Saudi Arabia. give references Answer: Oil prices is dropping.Major causes behind the fall is given below: Increase in Supply. Decrease in demand and fall of monopoly power in oil producers. The price of oil sunk to levels not seen since 2002 as demand for crude collapses amid the coronavirus pandemic.Oil prices have fallen by more than half...
Question: For each of the following scenarios, conduct the complete hypothesis testing process as appropriate give...
Question: For each of the following scenarios, conduct the complete hypothesis testing process as appropriate give that scenario. A regional manager implements a policy change for stores in his region to begin greeting customers whenever they are standing within a 3 metre distance in the store. He compares mean daily purchase numbers over one month from pre-change to post-change for each store to see if the change makes a difference in sales.             Mean daily purchases for Store 1 through...
Question 6 – Audit opinions (15 marks) For each of the following four independent scenarios, indicate:...
Question 6 – Audit opinions For each of the following four independent scenarios, indicate: • the type of audit opinion you would express in your audit report; • the reason(s) supporting your choice of opinion; and • which ASA (number is sufficient) most influences your choice. (a) Slocum Limited has changed its method of valuing closing inventory for the current financial reporting period from first-in-first out to weighted average. Inventory is a material proportion of Total Assets for Slocum Limited...
Journalize the entries to record the following selected transactions: (9.5 pts) 12/20 - Sold $900 of...
Journalize the entries to record the following selected transactions: (9.5 pts) 12/20 - Sold $900 of merchandise on account, subject to 7% sales tax.  The cost of the merchandise sold was $510. 12/31 - Paid $436 to the state sales tax department for taxes collected. Date Account Titles Debits Credits
Give a detailed explanation to the following question. Compare and contrast two types of herbicides commonly...
Give a detailed explanation to the following question. Compare and contrast two types of herbicides commonly used in agriculture in terms of mode of action, application, selectivity, characteristics in soils and degradation pathways.
QUESTION 2: (A) Consider the following two independent scenarios: Scenario 1: Fishtail Ltd has always measured...
QUESTION 2: (A) Consider the following two independent scenarios: Scenario 1: Fishtail Ltd has always measured its’ manufacturing equipment using the cost basis. In the current year, it decides the revaluation method will provide more relevant and reliable information to investors. Scenario 2: Fishtail Ltd has always depreciated its’ motor vehicle fleet using the straight-line method. In the current year, Fishtail decides that the diminishing value method will better reflect the consumption of the assets going forward. REQUIRED Which of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT