Applications of Cost Theory
“Applications of Cost Theory” Please respond to the following:
* From the scenario, determine the appropriate type of market structure for the situation in question. Cite at least four (4) defining characteristics that have helped you reach this decision regarding the appropriateness of the chosen structure. Recommend two (2) kinds of pricing and output strategies that Katrina’s Candies should use to reach the goal of profit maximization. Suggest key modifications that Katrina’s Candies should make in order to maintain a competitive advantage when new entrants enter the market. Provide a rationale for your suggestions.
Imagine that you are a manager of a chemical company. An accident has occurred in which chemicals leaked into the ground water nearby. The community is unaware of the accident. Compare the primary costs involved in cleaning up the water immediately (and thus confessing) versus hiding your culpability now and possibly paying more in the future. Predict the impact on profitability in both situations. Justify your response.
“Market Structures” Please respond to the following:
* From the scenario, suggest substantive ways in which Herb and Renee may use the information in the table in order to ascertain the profit maximizing level of output and price. Provide a rationale for your decision.
Compare and contrast monopoly and oligopoly. Recommend one (1) change that a company under each market structure should make in order to better maximize profits. Justify your response.
“Price Setting Strategies” Please respond to the following:
* From the scenario, determine to the importance of predicting the pricing strategies of rival firms in an industry characterized by mutual interdependence. Provide a rationale for your response.
Examine the common price setting strategies of airlines that use game theory. Predict the potential effects of such pricing strategies on the demand for seats, and conclude the resulting impact on the profitability of the airlines.