leht-set barriers. 5. Microsoft and its operating system are often cited as an e
ID: 1104808 • Letter: L
Question
leht-set barriers. 5. Microsoft and its operating system are often cited as an example of a company that grew through: a. ownership of a resource b. Patents c. network externalities. d. large economies of scale into a monopolis More difficult: 6. Hank runs a pedicure business in a perfectly competitive industry. He knows that he will break even (economic profit $0) if the price of pedicures is $15 but that he will have to shut down if the price is $11. If the market demand in the industry is P = 30-(02)Q and the market supply is P = (0.2)Q in the short run, Hank will: a. shut down, since he cannot cover any of his variable costs b. produce, but just break even. c. produce with a loss, since he is operating below his break-even level. d. shut down, although his is making a positive economic profit. using the equations, determine price and quantity for Hank's firm. 7. Refer to question #Explanation / Answer
5. b
Microsoft has several patents which has led to it growing into a monopoly.
6. b
At equilibrium, 30 - 0.2Q = 0.2Q
Q = 75
P = 0.2 x 75 = 15
Since price is below $15, he will break even.
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