productively efficient level. Productive efficiency is achieved when the marginal cost is at the lowest average total Cost. This means a productively efficient firm utilizes all its resourses and produces at the lowest cost possible. A monopolistic competitive firm is allocatively efficient when the marginal cost curve intersect the average revenue curve. This is because the price consumers are willing to pay equals the to the marginal utility they recieve. So a firm is allocatively efficient when there
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Table Title Page 1.1 2003 Market Share of Canadian Cable Companies. 2 2.1 Canadian Cable Industry 5 2.2 Rogers Communications Incorporation 7 2.3 Shaw Communications Incorporation 8 2.4 Cogeco Cable Company 9 3.1 Marginal Private Benefit 11 3.2 Marginal Private Cost 11 3.3 Demand Schedule of the market 12 Figure Title Page 1.1 2003 Market Share of Canadian Cable Companies. 2 2.1 Conventional Depiction of Natural Monopoly 4 2.2 Measurement of Possibility of Natural Monopoly 5
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The relationship between marginal revenue (revenue generated by increasing product sales by 1) and marginal cost (the cost in producing that 1 extra product) is important to a business in terms of profit maximization. A business reaches maximum profit when there is equilibrium between these two numbers. An imbalance on either side will result in a decrease in profit. Profit maximization in terms of total revenue to total cost shows that the maximum profit is achieved when the distance between the
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Maximization Marginal revenue is the change in revenue which comes from the sale of an additional unit of output. The relationship with total revenue is that total revenue is used in the formula to calculate marginal revenue. A company can calculate marginal revenue by dividing the change in total revenue with the change in output quantity. Because of demand‚ as production quantity increases the revenue per unit will decrease. On the other hand‚ marginal cost is the change in the total cost that comes
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that L costs the firm $90 per unit employed and K costs the firm $180 per unit employed. Given cost minimizing employment of the inputs‚ output is given by: Q =3L½. A. (7 pts.) Find the equation for minimized total cost in the long run‚ C(Q). (Hint: The standard rule for long run cost minimization that inputs should be employed so that the ratios of each input’s marginal product to its cost are equalized is not applicable here‚ because that rule applies when inputs can be substituted. Cost minimization
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that make it difficult for a company to enter a given market or industry. The most common barriers to entry include government regulation and economies of scale‚ but nowadays it is increasing for entry barriers to be viewed as a cost. Stigler defined barriers to entry as “A cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry”. Therefore‚ these invisible shields protect incumbent firms and reduce competition within the market
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reliability of key data used to make a decision. e. examining how a decision would change if key facts were changed. 3. Is benefit-cost analysis an unambiguous guide to decision making in the public sector? a. No‚ because of the timing of the benefits and costs. b. No‚ because public sector managers may disagree about the best means to obtain the benefits and costs. c. Yes. It offers clear results and ease in decision making. d. Yes‚ although it is not as simple as the rules for profit maximization
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relationship between the number of inputs and the law of diminishing marginal productivity is that as more input is added to an existing fixed input‚ eventually the additional output one gets from that additional input will fall. As input is increasing and a company hires more workers to increase‚ eventually it will fall and a company wants to try to stay out of that range. 2.2 – The Relationship between productivity and the cost of production can best be expressed by first understanding the definition
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firms enter) and the demand curve shifts to the left. If no one is watching the movies‚ firms loose money and the demand curve shifts to the right. Due to these shifts‚ zero profit equilibrium occurs‚ as shown above‚ where price equals average total cost. In movies today‚ and always‚ companies have made deals with movies in order to be included in a film. This is all part of marketing‚ as for example; companies think that if Brad Pitt is eating a Twix in a movie‚ the movie watchers are more
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day because the 15th ride costs him $17.50 to produce but Rick is willing to produce the 10th ride for its marginal cost‚ which is $15‚ so Rick’s producer surplus on this ride is $5. L ook at below the each producer surplus of each producer: Rick’s producer surplus = (base x height)/2 = (15 x 7.5)/2 = $56.25 Sam’s producer surplus = (base x height)/2 = (10 x 5.0)/2 = $25.00 Tom’s producer surplus = (base x height)/2 = (5 x 2.5)/2 = $6.25 c. What is the marginal social cost of producing 45 rides a day
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