Reference no: EM132177055
Please show work and thoroughly explain the answers Please.
Hardware stores (excluding Lowe's and Home Depot) in a large city would seem to be an example of a competitive market, since there are many sellers operating relatively small shops, each seller takes the price of hammers or nails as given, and the products (hammers, nails, etc.) are very similar between different shops.
a. How could you argue that the hardware store market is not competitive?
b. Is it possible that each hardware store could face a demand curve that is not perfectly elastic?
c. How profitable do you expect hardware stores to be in the long run?
Suppose the market demand and supply functions are QD = 300 - 2P and QS = 4P - 204. You have just graduated and moved to this city; as a new MBA and an entrepreneur, you are considering entering the market for this product.
a. Determine the equilibrium price and quantity in this market.
b. You've researched and found that most firms in the market currently experience costs such that TC = 40 + 71Q - 11Q2 + 3.4Q3. Determine whether or not you should enter this market. Use graphs to support your answer. (Remember that you can Format Axis and change the Minimum and Maximum Bounds of your axes to "zoom in" to a graph in Excel.)
c. Due to unforeseen delays, you don't enter the market. However, a year later the market supply has changed to QS = 5P - 253. Are you surprised at this shift in supply?
d. Given the new supply conditions, determine whether or not you should enter the market.