fit Maximization in Perfectly Competitive Mar 9.23 Suppose that oil tankers fall
ID: 1108694 • Letter: F
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fit Maximization in Perfectly Competitive Mar 9.23 Suppose that oil tankers fall into three classes: (tankers capable of carrying between 10,000 and 70,m weight tons, DWT, of crude oil-approximately 170 gallons): large (tonnages between 70,000 and 175,000 and super (tonnages over 175,000 DWT). The total tor each of the three classes is 53,000,000 in medium:;760 DWT in large; and 171,000,000 in super. Finally, s the constant annual operating cost per deadweight t for medium; S107 for large; and $84 for super. Based preceding information, graph the short-run supply curv each of the three tanker classes as well as for the o shipping industry on is Sl overal 0l 9.24 "In a competitive industry, high prices in response positive demand shock prevent higher prices." Explain w this statement is true, false or uncertain in the context competitive industry model developed in this chapter. To bek your analysis, think what would happen if government po cymakers precluded suppliers from raising their prices wake of a positive demand shock (e.g., local suppliers of lum ber were prohibited from raising the price of their products the wake of a tornado ravaging a community and the resulng need to rebuild homes in the community) to of the in t 9.25 Over the past four decades, the price of personal comp ers in real as well as nominal terms has declined markedly. Doe this mean that the personal computer industry is decreasing-co and that the long-run supply curve for personal computers i downward sloping? Explain why or why not. 9.26 Suppose that Delta Airlines fills only 60 percent of the seats, on average, on its Boeing 737 flights-a number 20 per cent below the industry average. If Delta incurs incremental costs of $2,000 per 737 flight, wouldn't it do better by sched- ing fewer 737 flights and thereby increasing the percentage of seats filled, on average, per flight? Why or why not? Explain. 9.27 In the market for cell phones, the amount generalod in revenue per unit sold by Nokia roughly equals the assocd ated incremental cost. Given that Nokia is losing money on cell phone product line, it would be wise for the company cease manufacturing such a product." True, false or uncertait Explain.Explanation / Answer
9.24 'High price in response to a positive demand shock prevents higher prices'. This is true in case of competitive industry. This is so because, high demand would induce the sellers to raise the prices but the price rise would not be higher due to prevailing perfect competition in the industry.
9.25 Yes this is true to a certain extent because reduction in cost would lead to a reduction in nominal price and a downward sloping supply curve shows that reduction in price wwould lead to increase in supply and due to increase in sales, the real price of computers also seem to be decreasing.
9.26 Yes the Airline may do so, if would be able to manage filling up of seats by scheduling fewer flights as this may surely help in increasing the percentage of seats filled on average, per flight.
9.27 False, it would not be wise for the company to increase manufacturing such a product. Since, the revenue earned per unit roughly equals the associated incremental cost and the company is running loss due to this reason.
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