I need some assistance with three questions on the attached document.
These are applied questions from
Managerial Economics 8th Edition Christopher Thomas McGraw-Hill
ISBN - 0-07-287174-1
Chapter 12 problem 4
Chapter 9 problem 4
Chapter 7 problem 1
Please see the attached file.
1. Antitrust authorities at the Federal Trade Commission are reviewing your company's recent merger with a rival firm. The FTC is concerned that the merger of two rival firms in the same market will increase market power. A hearing is scheduled for your company to present arguments that your firm has not increased its market power through this merger. Can you do this? How? What evidence might you bring to the hearing?
Show the FTC that even after merger there are enough choices available in the market for the customers. Some evidences could be
§ Show that the market share is still low (if it is actually true)
§ Show that the competition in the market is still high, in terms of number of companies in the market (if it is true).
§ Show that there is not much change in the price elasticity of demand. Measure the pre-merger and post-merger price elasticity of demand by the merger show that there is no change or little change in the elasticity.
§ Show that a large number of substitute products are available in the market. Measure cross price elasticity with substitutes. A large positive cross price elasticity would be a signal that the market power after merger is still not high.
2. The MorTex Company assembles garments entirely by hand even though a textile machine exists which can assemble garments faster than a human can. Workers cost $50 per day, and each ...
Managerial Economics Questions are posed.
Detailed answers to managerial economics questions
Indicate whether each of the following statements is TRUE or FALSE and explain your answer.
a. If a monopolist is producing a level of output at which demand is inelastic, the firm is not maximizing profits, and increasing output will decrease total revenue
b. When a monopolist maximizes profits, the price is greater than the marginal cost of producing the output. This means that consumers are willing to pay more for additional units of the product than these additional units costs to produce. Thus, the monopolist should produce and sell additional units of output
c. A monopolistcally competitive firm produces a level of output at which price equals $80, marginal revenue equals $40, average total cost equals $100, marginal cost equals $40, and average fixed cost equals $10. To maximize profit, the firm should produce a smaller output and sell it at a higher price.
d. In a monopolistically competitive market, a firm has market power because it produces a differentiated product. This means that the firm earns positive economic profit in the long run.