the exam

[fallout]

tarrifs = higher prices. domestic producers get the whole demand curve. both lead to entry

[Toonces]

On 2001-11-08 11:33, JohnnyD wrote:
2) Wouldn't lobbying to keep tarriffs high also work. If succesful, small companies could be assured of no foreign competition, high prices and would be more likely to enter. Advertising can raise demand and price, but good advertising would be more product specific, thus making the monoplist's product more demanded and making competition less effective. Tell me, who here would like to introduce a new soda or a new operating system right about now?

For the tariff answer, it undoubtedly would prevent foreign competition. I don't know that it would increase domestic competition, but probably not more than the reduction in foriegn competition.

As for the advertising answer, I agree with you, but the answer specifically said advertising for the purpose of increasing the demand curve (i.e. as opposed to product differentiation)

I went with advertising to increase demand as the least effective. Tarriffs at least discourage foreign competitors. Increasing demand should actively _recruit_ competition.

[Toonces]

More questions...

5) How did people answer question #50 about return on equity in 2001, when all of the 2000 and 2001 bookkeeping data was given?

6) What about question 2, which dealt with the price of labor and price of capital?

toonces,

these were 2 of the questions I felt very unconfident about...

#50 ) I put 600/6000 = 10.0 % C

#2) my answer was 20.0 I believe..I don't remember how I calculated it, but I used the numbers in some kind of ratio..

I'd like to hear more results on those 2 questions

[trinity]

The key point is that the monopoly advertise to shift the INDUSTRY curve OUT, which raise the industry demand and attract new entrants. And remember that one way the monopoly to make money is to lower the output intentionally to keep high price.

[MakersNeat]

#50 - I divided by average book equity, but if you divide by ave. market equity that answer was there as well.

For the wage question. I think I saw that Capital got paid 2x its MPC, so I chose the answer that gave Labor 2x its MPC.

I also ignored the 2001 numbers for the ROE and divided the two numbers. I thought it seemed too easy, but I didn't know what else to do. Maybe all those other numbers were red herrings?

[tesla_styx]

5) earnings available to shareholders (2001) divided by average book equity (2000 and 2001)...though i'm not positive that you use book equity (as opposed to market value)

2) you needed to equate the marginal values of each... can't remember the problem specifics

[trinity]

Oh, I divide the earnings by the average of MV of the equity. I was wrong!!