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

Assignment Help:

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.

 


Related Discussions:- Define sunk costs-fixed costs-economies of scale

Propensity, different determinants of propensity to consume

different determinants of propensity to consume

Marginal tax rates imposed on individuals and families, Compared with the s...

Compared with the situation before 1981, the marginal tax rates imposed on individuals and families with high incomes are now lower. What was the top marginal personal income tax r

Explain about the elasticity and total revenue, Explain about the elasticit...

Explain about the elasticity and total revenue. Elasticity and Total Revenue: a. When demand for a good is elastic, a raise in price decreases total revenue. Then Sales effe

Describe classical model of macroeconomics, Q. Describe classical model of ...

Q. Describe classical model of macroeconomics? Though we use the term ‘the classical model' as if there were just one classical model, this isn't quite true. For all the models

What do you mean by capital flows, Q. What do you mean by Capital Flows? ...

Q. What do you mean by Capital Flows? With free capital flows, this is a very unreasonable assumption. If we domestic interest rate increase against the foreign interest rates,

Determine the principle of equity, Determine the principle of equity Th...

Determine the principle of equity The principle of equity is that a tax must be fair and the tax is levied on those with the ability to pay tax. The principle of efficiency

Banking system, how is credit creation by commercial bank

how is credit creation by commercial bank

Unemployment classification, Unemployment classification Economists som...

Unemployment classification Economists sometimes differentiate between different types of unemployment. There are many type of ways of classifying unemployment however the foll

Should the fiscal policy be active or passive?, In the view of above compli...

In the view of above complications, there is a long-standing debate on whether the fiscal policy should be active or passive in nature. Note that in the Keynesian context; even a p

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd