Project #63208 - Economics - Exam

- Midterm Exam

- Master's Level Course

- Please answer each just below the question.



Question 2


                 (2) Define and explain the NPV (net present value) calculation for a firm. Why does this make economic sense? How would you apply this analysis to determine what investment projects are profitable for the firm. How would you use this analysis to determine which of two alternative projects would maximize profits for the firm? (Hint – for this last question, you may want to consider alternative scenarios. Could both projects be pursued simultaneously?)     




Question 3


                 (3) Define and explain the concept of the ‘Price Elasticity of Demand.’ Include an explanation of ‘inelastic demand’ and ‘elastic demand.’ What can you say about the price elasticity of demand at the point where a monopolist would maximize profits? Can you express the optimal price-cost margin in terms of the elasticity of demand? 




Question 4


                (4) Can you prove the formula for the optimal price-cost margin in relation to the elasticity of demand? (Hint: Start with the condition to maximize profit in terms of marginal analysis with regard to price and cost. From that equation, see if you can derive a result in terms of price-cost margin (P-MC) / P and the elasticity of demand, ‘e.’)                                                                                           




Question 5


                 (5) Define and explain the concept of ‘learning curves?’


(a) Definition and Explanation


(b) Give an example. Explain why your example demonstrates the phenomenon of learning curves.


(c) Are there products where you think learning curves would likely not be in effect? What are the differences between industries where learning curves are stronger and where they are weaker or unimportant?


Question 6


                (6) Define and explain the concept of ‘industry equilibrium?’


(a) Definition and Explanation: Explain why this is called an ‘equilibrium.’


(b) What are the forces that would cause market supply and demand (or more precisely, the quantity demanded and the quantity supplied) to move to market equilibrium?         




Question 7         


                (7) Define and describe competitive industries, oligopolistic industries and monopolistic industries.


(a) Definition and explanation of each term


(b) What are the important differences between them with regard to (i) conditions of demand, (ii) conditions of supply, (iii) conditions of entry and exit.


(c) Give an example of each, and explain why it is an example of the industry structure you are describing.




Question 8


                (8)Explain and apply Michael Porter’s ‘Five Forces Model’ as a basis for understanding the competitive forces in an industry as follows:


(a) Describe each of the five forces, and why they are important to determine the profitability of an industry.


 (b) Explain and distinguish how each of the five forces apply to at least two of the following industries: soft drinks, airframe manufacturers (Boeing vs. Airbus), supermarkets, and fast food restaurants.








Subject Business
Due By (Pacific Time) 03/24/2015 12:00 am
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