BBA 2501
Unit V Homework
BBA 2501/Principles of Microeconomics
Columbia Southern University
Chapter 9 Questions (Pg. 159) #1,2,3,8 and #10
1. Economies of a scale can be a barrier to entry when an increased output leads to
lower average costs. Then new firms with lower output will find it more difficult to
compete with the other firms. The newer firms will find it hard to compete because
their average costs will also be higher than the incumbent firms benefiting from the
economies of scale. The possibility of having higher average costs also may deter
entry for new firms.
2. There are several other barriers to entry that block newer firms. Some of the barriers
are high research and development costs, high set-up costs, legal costs such as
contracts, licenses, patents, etc. Another barrier is the control of the resources by
another firm. Control of essential resources by another firm can be a barrier if they
have all the control of any resource that would be needed to produce a given product
by another new firm.
3. a. Maximum Price: $525, Avg Total Price: $400
b. The firm would have to lower the average revenue and price for each ring. The
marginal revenue would decrease with each ring that the firm sells until the marginal
revenue would be less than the price.
, c.
d.
8. Three conditions must be met for a monopolist to price discriminate successfully. First,
the company must have a downward slope in the demand for the firm’s product. Second,
the company must have two different price consumer groups for the product. Last, the
company needs to be a able to charge a different price at a small cost to the different
groups.
10. The perfectly discriminating monopolist’s marginal revenue curve is identical to the
demand curve because the monopolist is able to charge the higher price that a consumer
is willing to pay for each item. The discriminating monopolist does not need to lower the
price of all the units that they would sell and, in that way, the marginal revenue curve
would be its demand curve.
Chapter 10 Questions (Pg. 178-179) #1,2,3, #6-11
1.
Output Price FC VC TC TR Profit/Loss
0 $100 $100 $0 $100 $0 -$100
1 $90 $100 $50 $150 $90 -$60
2 $80 $100 $90 $190 $160 -$30
3 $70 $100 $150 $250 $210 -$40
4 $60 $100 $230 $330 $240 -$90
5 $50 $100 $330 $430 $250 -$180
6 $40 $100 $450 $550 $240 -$310
7 $30 $100 $590 $690 $210 -$480
Unit V Homework
BBA 2501/Principles of Microeconomics
Columbia Southern University
Chapter 9 Questions (Pg. 159) #1,2,3,8 and #10
1. Economies of a scale can be a barrier to entry when an increased output leads to
lower average costs. Then new firms with lower output will find it more difficult to
compete with the other firms. The newer firms will find it hard to compete because
their average costs will also be higher than the incumbent firms benefiting from the
economies of scale. The possibility of having higher average costs also may deter
entry for new firms.
2. There are several other barriers to entry that block newer firms. Some of the barriers
are high research and development costs, high set-up costs, legal costs such as
contracts, licenses, patents, etc. Another barrier is the control of the resources by
another firm. Control of essential resources by another firm can be a barrier if they
have all the control of any resource that would be needed to produce a given product
by another new firm.
3. a. Maximum Price: $525, Avg Total Price: $400
b. The firm would have to lower the average revenue and price for each ring. The
marginal revenue would decrease with each ring that the firm sells until the marginal
revenue would be less than the price.
, c.
d.
8. Three conditions must be met for a monopolist to price discriminate successfully. First,
the company must have a downward slope in the demand for the firm’s product. Second,
the company must have two different price consumer groups for the product. Last, the
company needs to be a able to charge a different price at a small cost to the different
groups.
10. The perfectly discriminating monopolist’s marginal revenue curve is identical to the
demand curve because the monopolist is able to charge the higher price that a consumer
is willing to pay for each item. The discriminating monopolist does not need to lower the
price of all the units that they would sell and, in that way, the marginal revenue curve
would be its demand curve.
Chapter 10 Questions (Pg. 178-179) #1,2,3, #6-11
1.
Output Price FC VC TC TR Profit/Loss
0 $100 $100 $0 $100 $0 -$100
1 $90 $100 $50 $150 $90 -$60
2 $80 $100 $90 $190 $160 -$30
3 $70 $100 $150 $250 $210 -$40
4 $60 $100 $230 $330 $240 -$90
5 $50 $100 $330 $430 $250 -$180
6 $40 $100 $450 $550 $240 -$310
7 $30 $100 $590 $690 $210 -$480
