Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

6) Long-run competition. Much of the cost of a new smart phone is in the research and evelopment and in building manufacturing facilities. By contrast,

image text in transcribed
6) Long-run competition. Much of the cost of a new smart phone is in the research and evelopment and in building manufacturing facilities. By contrast, the marginal cost of producing another phone is relatively low. a) (2 points) You have been hired by Apple to recommend pricing and marketing strategies for their next phone. On one graph: draw a hypothetical Average Total Cost (ATC) curve, the Marginal Cost curve, and 3. Demand (MU) curve for iPhones. (Hint: The point where Demand intersects MC should be below the ATC curve.) b) (2 points) Show the area of net prot (or loss) under perfect competition as the difference between average total cost and the average revenue (or the price). (Note that prot is the number of phones sold times the price minus ATC.) What will happen to the industry and the number of companies under competitive conditions? Why? 0) (1 points) Duplicate the ATC, MC, & MU graph from part b, but this time, show what happens if they can charge a monopoly price. Show the area of net prot as the difference between average total cost and the price multiplied by the number of phones sold (Prot = (P ATC)*Q). How does this change consumer, producer, and total surplus? d) (1 point) Mat can Apple do to maintain a monopoly pricing strategy? Would their success depend on having very low xed costs

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Rediscovering Sustainability Economics Of The Finite Earth

Authors: ARG Heesterman

1st Edition

1317069846, 9781317069843

More Books

Students also viewed these Economics questions

Question

List the characteristics of wellset goals.

Answered: 1 week ago

Question

2. Develop a good and lasting relationship

Answered: 1 week ago

Question

1. Avoid conflicts in the relationship

Answered: 1 week ago