Managerial Economics August 15‚ 2007 The key points underpinning the economics of a profit maximizing firm Neoclassical model of the firm states that organization will have the main objective of maximizing its profit within a given period of time. Maximum profit was achieved at the output at which marginal cost is equal marginal revenue. There are several factors which need to be considered when talking about the profit maximizing firm: 1. The assumption of the profit maximizing firm is that
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Customers will buy from the firm that they see as offering the highest perceived value . Customer perceived value (CPV) is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Total customer value is the perceived monetary value of the bundle or economic‚ functional‚ and psychological benefits customers expect from a given market offering. Total customer cost is the bundle of costs customers expect to
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Chapter Nine: Competitive Markets 9.1 Market Structure and Firm Behaviour Market structure: all features of a market that affect the behaviour and performance of firms in that market‚ such as the number and size of sellers‚ the extent of knowledge about one another’s actions‚ the degree of freedom of entry‚ and the degree of product differentiation. Competitive Market Structure Market power: the ability of a firm to influence the price of a product or the terms under which it is sold. The
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CASE EXERCISE (PAGE 263) THE PRODUCTION FUNCTION FOR WILSON COMPANY Economists at the Wilson Company are interested in developing a production function for fertilizer plants. They collected data o 15 different plants that produce fertilizer. Plant | Output(000 tons) | Capital($000) | Labor(000 Worker Hours) | 1 | 605.3 | 18‚891 | 700.2 | 2 | 566.1 | 19‚201 | 651.8 | 3 | 647.1 | 20‚655 | 822.9 | 4 | 523.7 | 15‚082 | 650.3 | 5 | 712.3 | 20‚300 | 859.0 | 6 | 487.5 | 16‚079 | 613
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Justin Brewer MBA-540 9-16-12 Case Assignment 5 Case Analysis 5 United Airlines I do not feel that discontinuing the flights from San Francisco to Washington D.C. is necessarily the best option in this scenario. I feel that the use of marginal analysis is warranted in this scenario‚ as well as United viewing the other calculations from WSJ to ensure their accuracy. Marginal Analysis is defined as the process of identifying the benefits and costs of different alternatives by examining the incremental
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1. Speed company a. Single markup Manufacturing unit MC=$200‚ selling and distribution cost Sales unit MC=$150 End user’s consumer demand P=1000-0.01Q. P is the price for each printer and Q is the quantity demanded in the marketplace. The marginal revenue corresponding to the demand is MR=1000-0.02Q. Total marginal cost MC=$200+$150=$350. The firm maximizes profit when MR=MC. Thus‚ 1000-0.02Q=350. Q=32500. Substituting Q into the demand equation we find the profit maximizing price‚ P
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Efficiency gains achieved without loss of perceived benefits. Competitive advantage through a low-price strategy might be achieved by focusing on a market segment and having the most efficient operation management is crucial to survive. The food retail of Aldi’s industry is a highly competitive market. Because organizations need to offer customers value for money. Customers want the best quality products at the lowest possible prices. With such tough competition it is vital for organizations to understand
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CHAPTER 23 Pure Competition A. Short-Answer‚ Essays‚ and Problems 1. How does pure competition differ from other basic market models? 2. What are some examples of the four different market structures? 3. What are four characteristics of pure competition? 4. How would you describe the demand curve for the purely competitive firm? For the industry? 5. What is the difference between average‚ total‚ and marginal revenue? What is the
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Patents: General: Meaning of patent The word patent is not defined in the tax legislation. The legislation covers patents granted anywhere in the world except where it specifically refers to a UK patent. A patent consists of rights conferred by letters patent to the exclusive use and benefits of a particular invention. It will last for a specified period. The period for which a patent lasts is often referred to as the term of the patent. A patent is a form of protection for an inventor. A person
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Diversification Diversification can be briefly defined as the expansion of a firm into a range of different product areas. Firms may choose to diversify for either of two reasons. First‚ diversification may benefit the firm’s owners by increasing the efficiency of the firm. Second‚ if the firm’s owners are not directly involved in deciding whether to diversify‚ diversification decisions may reflect the preferences of the firm’s managers. Singapore Airlines (SIA) serves as a typical example of diversification
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