Define sunk costs-fixed costs-economies of scale, Macroeconomics

Address the following issues concerning technological and strategic barriers to entry.

(a) Explain the role of economies of scale and (long run) fixed costs as technological barriers to entry. Argue that, even in the case of a natural monopoly, an incumbent monopolist may hold no market power when a market is contestable. In addition, discuss the role of sunk costs and the incumbents response lag in determining its market power (i.e.: the incumbents ability to command a profit).

Define sunk costs, fixed costs, economies of scale, natural monopoly and contestable markets as part of your answer, as well as all the technical terminology you use.

(b) Market incumbents may also rely on strategic barriers to entry. Describe the basic limit pricing model of strategic entry deterrence.

Explain why limit pricing arguments are sometimes said to rely on incredible threats. Using an entry deterrence game, explain the role of sunk actions (for instance, sunk investments) in making such incumbents threats credible.

 

Posted Date: 3/22/2013 6:39:31 AM | Location : United States







Related Discussions:- Define sunk costs-fixed costs-economies of scale, Assignment Help, Ask Question on Define sunk costs-fixed costs-economies of scale, Get Answer, Expert's Help, Define sunk costs-fixed costs-economies of scale Discussions

Write discussion on Define sunk costs-fixed costs-economies of scale
Your posts are moderated
Related Questions
Commercial Banks: Balance Sheet The accompaning table gives the balance sheet of a commercial bank in a simplified format. The balance sheet contains particulars of a Bank's cu

What is the present worth of a cash flow that gives you $6 in every time period from 1 to 20 when the interest rate is zero?

In a Poisson distribution U=4. A) What is the probability that X=2? B) What is the probability that X is 2?

The LM-curve in the AS-AD model  The LM-curve will shift upwards (downward) when P is increases (decreases) in the AS-AD model is moved L

Why is quantitative easing used during liquidity trap when it lowers interest rates too?

Consider the impact of an increase in thriftiness in the Keynesian-cross analysis. Assume that the marginal propensity to consume is unchanged, but the intercept of the consumption

Consider following 5,000 value securities. Bond Coupon Rate Selling price coupon payment yield to maturity% 6% $5000 6% $5500 10% $5000 12% $4500 A. Are those securities abov

different between money multplier vs credit multplier ?

In reference to the above question, assume you know the combination of inputs that minimizes cost. What would happen to this input combination if the price of labor increased? What

What is the difference between Comparative Advantage and Absolute Advantage? Difference between Comparative Advantage and Absolute Advantage: Comparative advantage: it is