Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2E
To determine
To describe: The reason for MTV reaping huge profits that other networking companies are not able to achieve
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Television channel operating profits vary from as high as 45 to 55 percent at MTV and Nickelodeon down to 12 to 18 percent at NBC and ABC. Provide a Porter Five Forces analysis of each type of network. Why is MTV so profitable relative to the major networks?
The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run.
A: Identify the area that represents consumer surplus.
B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit?
C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.
Macmillan Learning
Increasing Returns to Scale and Monopolistic Competition
Starting from the long-run trade equilibrium in the monopolistic competition model, as illustrated in the accompanying figure,
consider what happens when industry demand D increases. For instance, suppose that this is the market for cars, and lower
gasoline prices generate higher demand D.
a. Show the resulting shift in the D/NT, d, and mr curves. Assume the price increases to $13. Place point A on the new short-run
equilibrium.
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Chapter 10 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- why is the restaurant industry is often used as an example of the market structure of monopolistic competition. How does this affect the long and short run? address all aspects and assumptions of the model of monopolistic competitionarrow_forwardThe diagram above represents a monopolistically competitive firm. Answer the questions below. Is this firm operating in the short-run or long-run? How do you know? Calculate this firm’s accounting profit. From the diagram, what is the productively efficient output for this firm? From the diagram, economies of scale are maximized at which output level? Explain. From the diagram, what is the allocatively efficient output for this firm? Explain.arrow_forwardExplain the importance of advertising in monopolistically competitive industries . How does this compare with the importance of advertising in perfectly competitive industries?arrow_forward
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