Question

In: Economics

Consider the following situations and determine whether they exhibit simultaneous consumption, network effects, x-inefficiency or rent-seeking...

Consider the following situations and determine whether they exhibit simultaneous consumption, network effects, x-inefficiency or rent-seeking behavior. Assume the businesses referenced function as monopolies.

(a) A pharmaceutical company discovers a vaccine for the common cold. The company puts a significant effort into tests to get it FDA-approved and into hiring lawyers to obtain a patent.

(b) An Internet service provider adds thousands of new customers.

(c) The head of a family-owned, major hotel chain decides to hire his wild, socialite niece to work as an executive of the company after her reality TV career ends.

(d) An online profile company helps college and high school students from across the country to connect with each other.


Solutions

Expert Solution

a) Rent-Seeking Behaviour
The company has developed a vaccine for the common cold and has been trying to get a patent for that. The patent means only this company will be allowed to sell it and in that case, the company will price it well above its cost. That will be like manipulating the society which is nothing but the rent-seeking behavior.

b) Network Effect
The network effect is the scenario where an addition to the user base of product or service actually improves the overall ecosystem of that product or service by creating a positive externality. Internet's rising user base means there will be more software, online services, and marketing opportunities.

c) X-inefficiency
This is the scenario where a firm operates in a less competitive market and it does not need to lower the cost or become an efficient player. The head of hotel chain has inducted his niece who has no related experience and not so competitive in management indicates an x-inefficiency scenario.

d) Simultaneous Consumption
An online profile company is connecting college and high school students through its portal which is a single product and does not incur any extra distribution cost while providing this service. This is the case of simultaneous consumption where a single product serves a large number of customers and there is no additional distribution cost.

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

For the following situations, determine whether the energy of the given system is the same at...
For the following situations, determine whether the energy of the given system is the same at the initial and final states indicated (i.e., is the energy of the system constant or not). 0pts 0pts A block is hung from a spring that is vertical and connected to the ceiling. The block is made to oscillate vertically. Call the initial state when the block is at its highest position and the final state when the block is at its equilibrium position....
Determine whether or not the following statements are true or false. A. If the income consumption...
Determine whether or not the following statements are true or false. A. If the income consumption curve is vertical, the Engel curve for good y is upward sloping. B. If the price consumption curve (as the price of good x changes) is vertical, the price elasticity of demand for good x is zero. C. An upward sloping price consumption curve (as the price of good x changes) indicates that goods x and y are complements in consumption. D. If preferences...
Determine whether or not the following statements are true or false. A. If the income consumption...
Determine whether or not the following statements are true or false. A. If the income consumption curve is vertical, the Engel curve for good y is upward sloping. B. If the price consumption curve (as the price of good x changes) is vertical, the price elasticity of demand for good x is zero. C. An upward sloping price consumption curve (as the price of good x changes) indicates that goods x and y are complements in consumption. D. If preferences...
In each of the following situations, identify the independent variable and dependent variable. Determine whether the...
In each of the following situations, identify the independent variable and dependent variable. Determine whether the growth is linear or exponential and explain why by the definition of linear and exponential growth (Do not present the table) a) The price of gasoline has been rising 2% per month. b) The total cost of a taxi ride increases by $ 5 per 2 miles. c) The population of a bacteria is double every 20 hours.
Determine where the following situations would enter into a capital or current account , and whether...
Determine where the following situations would enter into a capital or current account , and whether as a debit(-) or credit(+) on the balance of payments in Jamaica. (a) purchases of cars and computers from Germany (b) A Jamaican who is working in Jamaica and living in Jamaica has opened a bank account in Miami transferring US 8,000 into it (c) A grant given to the Venezuela by the Government of Jamaica (d) A money gift sent by a Jamaican...
For each of the following situations, explain whether the binomial distribution applies for X. a. You...
For each of the following situations, explain whether the binomial distribution applies for X. a. You are bidding on four items available on eBay. You think that you will win the first bid with probability 25% and the second through fourth bids with probability 30%. Let X denote the number of winning bids out of the four items you bid on. b. You are bidding on four items available on eBay. Each bid is for $70, and you think there...
Consider the series X∞ k=2 2k/ (k − 1)! . (a) Determine whether or not the...
Consider the series X∞ k=2 2k/ (k − 1)! . (a) Determine whether or not the series converges or diverges. Show all your work! (b) Essay part. Which tests can be applied to determine the convergence or divergence of the above series. For each test explain in your own words why and how it can be applied, or why it cannot be applied. (i) Divergence Test (ii) Direct Comparison test to X∞ k=2 2k /(k − 1). (iii) Ratio Test
In the following independent situations, discuss and determine whether a parent–subsidiary relationship exists, and which entity,...
In the following independent situations, discuss and determine whether a parent–subsidiary relationship exists, and which entity, if any, is a parent. You must fully explain and support your answer. This includes identifying and discussing each of the important facts or considerations in each case. (a). Tom Ltd is a company that was hurt by a major downturn in the economy. It previously obtained a significant loan from Jenson Bank, and when Tom Ltd was unable to make its loan repayments,...
In the following independent situations, discuss and determine whether a parent–subsidiary relationship exists, and which entity,...
In the following independent situations, discuss and determine whether a parent–subsidiary relationship exists, and which entity, if any, is a parent. You must fully explain and support your answer. This includes identifying and discussing each of the important facts or considerations in each case. Sawyer Ltd is a major financing company whose interest in investing is return on the investment. Sawyer Ltd does not get involved in the management of its investments. If an investee is not managed properly, Sawyer...
In the following independent situations, discuss and determine whether a parent–subsidiary relationship exists, and which entity,...
In the following independent situations, discuss and determine whether a parent–subsidiary relationship exists, and which entity, if any, is a parent. You must fully explain and support your answer. This includes identifying and discussing each of the important facts or considerations in each case. 1.Bernadette Ltd and Howard Ltd each hold 50% of the shares in Jerry Ltd, all companies being involved in the computer software industry. Bernadette Ltd agrees that Howard Ltd should provide the management of Jerry Ltd...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT