Economies of scale as a barrier to entry. Concept Introduction: Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

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Answer 1

Question

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

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(1.) Johnny Rockabilly has just finished recording his latest CD. His record company marketing department determines that the demand for the CD is as follows: Number of CDs Price $24 10,000 22 20,000 20 30,000 18 40,000 6 50,000 3 60,000 The company can produce the CD with no fixed cost and a variable cost of $12 per CD. a. Find total revenues and marginal revenues for each of the quantities. b. What quantity of CDs would maximize profit? What would the price be?

(J) Suppose the production process of a particular good creates a negative externality such as pollution. Other things being equal, would society be better off if this good were produced by a perfectly competitive market or by a monopoly? a. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market responds to consumers' desires in the long run b. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market will produce the quantity where Marginal Revenue equals Marginal Cost c. Society would be better off if this good were produced by a monopoly,

Answer 2

Question

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

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Answer 3

Question

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

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Answer 4

Question

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

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Answer 5

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Answer 6

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.

Answer 7

Chapter 9, Problem 1P

To determine

Economies of scale as a barrier to entry.

Concept Introduction:

Economies of scale refer to the benefit achieved by the big entity over the small entity, because of producing in much effective and cost saving way.Larger the entity, lower is the cost.

Answer 8

Expert Solution & Answer

Explanation of Solution

If the increase in production results in a decrease in average total cost, then in such a case, there will be a downward sloping curve of average total cost. Therefore, it is more profitable for a producer to produce more if the average total cost is decreasing with the increase in production.

The economies of scale are mostly enjoyed by the already existing firm, who have decreased its cost of production by using its resources in a most efficient way and by reducing its average total cost. The new firm cannot use its resources with that much efficiency and it cannot even reduce its cost of production, as much already existing firm can. Thus, a new firm cannot compete with the already existing firm and cannot gain economies of scale. Therefore, entry of new firm is restricted because of economies of scale.