Find the monopolistically competitive high price-low output

Reference no: EM1369703

World Class Manufacturing Operations has enjoyed rapid growth in sales and high operating profits. But now the company faces potentially fierce competition from a large number of new competitors as WCMO's important basic patents expire during the coming year. Unless the company is able to thwart such competition, severe downward pressure on price and profit margins is anticipated.

Use the price, output, and total cost data below to answer the questions following the table where all data except price are in millions:

Price Monthly Total Marginal Total Marginal Average Total
Output Revenue Revenue Cost Cost Cost Profit
$20 0 $0 $0 $0 $0 $0 $0
19 1 19 $19 12 $12 $12.00 $ 7.00
18 2 36 17 27 15 13.50 9.00
17 3 51 15 42 15 14.00 9.00
16 4 64 13 58 16 14.50 6.00
15 5 75 11 75 17 15.00 0
14 6 84 9 84 9 14.00 0
13 7 91 7 92 8 13.14 -1.00
12 8 96 5 96 4 12.00 0
11 9 99 3 99 3 11.00 0
10 10 100 1 105 6 10.50 -5.00
[Total costs include a risk-adjusted normal rate of return.]
(A) If the cost conditions remain constant, what is the monopolistically competitive high price-low output equilibrium in this industry? What are the industry profits?
(B) Under these same cost conditions, what is the monopolistically competitive low price-high output equilibrium in this industry? What are the industry profits?
(C) Now assume that WCMO is able to enter into restrictive licensing agreements with potential competitors and create an effective cartel in the industry. If demand and cost conditions remain constant, what is the cartel price-output and profit equilibrium?

Reference no: EM1369703

Questions Cloud

Assists your response by indicating why you believe : Assists your response by indicating why you believe it is an example of communicating in an ethical manner and why you believe the decision was made

Questions in effective public administrative responses : What is transfer of training and how is it used? How can managers ensure transfer of training and explain your answer and provide an example.

What actions did congress and supreme court take : What actions did Congress and Supreme Court take to reduce monopoly power in late-19th century. How successful were these actions in regulating business activities.

Are you still thinking that capital is blueprint for society : It is important to remember that in a communist society difference between value of machine and value of labour-power replaced by it will always vary. Are you still thinking that Capital is blueprint for society.

Find the monopolistically competitive high price-low output : World Class Manufacturing Operations has enjoyed rapid increase in sales & high operating profits. But now the firm faces potentially fierce competition from a large number of competitors as WCMO's important basic patents expire during the coming yea..

Write program which models the employee : Write program which models the employee. An employee has an employee number, a name, an address, and a hire date. A name consists of a first name and a last name.

Explain a conflict situation you have experienced : Explain a conflict situation you have experienced in the workplace and Explain the impact that the communication process played in resolving or escalating the conflict?

Create data warehouse sections including computers-dvds : Create a data warehouse for electronics store chain. The chain has 20 stores in 5 cities. Each store has different sections including computers, DVDs, TVs, audio, home appliances etc.

How are savers and borrowers brought together : people who want to borrow to finance their investment spending. How are savers and borrowers brought together.

User Account

All Pages