Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 12, Problem 5DQ
To determine
The price that a company would be offer when there is bankruptcy.
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Volkswagen sells cars in many countries throughout the world, including Mexico and other Latin American countries. How would you expect its market position to differ in those countries compared with that in the United States?
From the 1990’s to now, the market has changed considerably, with DeBeer having to adapt to new challenges. The first is the introduction of direct competitors. Russia’s state-owned diamond company ALROSA now produces more diamonds than DeBeers itself. Some new firms even bought mines from DeBeers when the company was trying to support their balance sheet.
Another change is the introduction of substitutes, with synthetic diamonds becoming more appealing to price-conscious young shoppers. Advances on the production of these products are fairly recent, notably, in 2015 New Diamond Technology displayed the potential of synthetics by creating a ten-carat polished diamond.
This means the market is changing from monopoly to monopolistic competition. We know that entry of other firms will cause the monopolists demand curve to shift.
4. From the 1990s to now, the market is changing from monopoly to monopolistic competition. Explain reasons for this change.
) Agatha's Inc. is about to introduce a new product in the market, but is not sure as to how it should price the product. The company is facing intense competition from five other companies. In such a situation, what should be Agatha’s Inc. pricing objective? Provide an explanation for your answer.
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