Explore how firms in monopolistic competition differentiate their products or services to generate a market niche and gain more control over their pricing. To what extent can product differentiation create barriers to entry? How can product differentiation help firms to increase their short-run profits? Give an example of a firm in monopolistic competition, and discuss the strategies used by the firm to differentiate itself and perhaps earn economic profits in the short run.© BrainMass Inc. brainmass.com October 25, 2018, 9:47 am ad1c9bdddf
Explore how firms in monopolistic competition differentiate their products or services to generate a market niche and gain more control over their pricing.
In the monopolistic competition there is a market structure marked by a high degree of competition which is not perfectly competitive. Product differentiation plays a crucial role here. In the monopolistic competition firms differentiate their products by making them different. This differentiation can be achieved by style/type, location or quality. For example auto manufacturers offer different type of cars to their customers such as sedans, suv's, minivans, sport cars or trucks. They may locate their stores in the city center so that more people would be ...
This solution discusses differentiation strategies that are used in the monopolistic industries are explained with real-life examples. Reference used is included.
Applying concepts of managerial economics.
I need help understanding and applying concepts of managerial economics.
1. The manager of American Box Company conducts a study and notes his 10 workers produce approximately 2,000 boxes per week. He assumes that if he can employ 20 workers, the number of boxes will increase to 4,000 per week, and if he can employ 30 workers, the number of boxes per week will reach 6,000. Explain why the manager's assumption is correct or incorrect.
2. ElectraCorp has been earning zero economic profit for the past six months. Would it be wise for ElectraCorp to cease operations? Why or why not?
3. What is economic profit?
4. The best price and cost scenario occurs when the price of the company's product equals marginal cost. Explain why this is so.
5. Why wouldn't it be better for the price of a product to exceed its marginal cost?
6. Describe the four market structures of pure competition, pure monopoly, monopolistic competition, and oligopoly.
7. Under the monopolistic competition model where the vast majority of firms operate, what role is played by product differentiation?
8. Why are entrepreneurs the most important people in the successful operation of many firms?
9. Describe the Coase theorem and its approach to solving the externality problem.
10. Some people believe that the minimum wage should be raised to $10.00 per hour "to help poor people escape from poverty." How would raising the minimum wage to $10.00 per hour actually harm poor people, businesses, and consumers in general?
11. As manager of Centrix Diagnostics Services, you receive exciting news from the R & D division that a new technological breakthrough (that will very soon be discovered by all other diagnostics service companies) will cut your firm's costs of providing services by 15%. Should you recommend the current price for the services be maintained after implementing the new technology in the hopes of earning a substantial profit, or will it be wiser to lower the price for the services? Explain.
12. How do tariffs imposed by the U.S. government on foreign-made steel impact the domestic price of U.S.-made steel?
13. Who gains and who loses from a tariff?
14. How will a quota imposed by the U.S. government on foreign-made machinery impact the domestic price of the same kind of machinery made by U.S. companies?
15. Who gains and who loses from a quota?
16. "We need all kinds of trade restrictions against foreign competition to protect American jobs!" Explain why this argument is seriously flawed.View Full Posting Details