Market Structures and Strategic Business Decision-Making

Instructions: Provide answers and solve the following questions or exercises using materials presented in Chap. 8 (Pricing & Output Decisions: Perfect Competition and Monopoly) and Chap. 9 (Pricing & Output Decisions: Monopolistic Competition and Oligopoly). Bring your responses to our next meeting.

1. A firm in a competitive markets receives $500 in total revenue and has marginal revenue of $10. What is the average revenue , and how many units were sold?

1. A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200.

1. What is its profit, marginal cost, and average variable cost?

1. Is the current output of the firm the efficient scale of production? Is it more or less than 100 units?Explain.

1. Suppose the book-printing industry is competitive and begins in a long-run equilibrium.

1. Draw a diagram showing the average total cost, marginal cost, marginal revenue, and supply curve of the typical firm in the industry.

1. Better Publishers invents a new process that sharply reduces the cost of printing books. What happens to their profits and the price of books in the short-run when their patent prevents other firms from using the new technology.

1. What happens in the long-run when the patent expires and other firms are free to use the technology invented by Better Publishers.

1. On one side, a pharmaceutical firm that produces a specialized brand of pain killers, advertise their product and, as a result, it has a good amount of customers that are loyal to their brand.On the other side, firms producing generic pain killers have no advertisement and consumers buy their product only because its low price. Suppose, both these firms have similar and constant marginal costs.

1. Draw a diagram that show the curves of demand, marginal revenue, and marginal cost for each of these firms. Also, indicate the level of production and margin over their marginal cost for each firm.

1. What is the difference between these firms? Which firm has the greatest margin? Explain.

1. Which firm has the major incentive to exercise stringent quality control over their production? Explain.

1. Thirty years ago, the market of chicken meat was perfectly competitive. Afterwards, an innovative entrepreneur started to advertise his brand of chicken meat.

1. How did this innovative entrepreneur created a specialized brand of chicken meat? What does he gained from it?

1. What does society gained from having a specialized brand of chicken meat?