Refer to Figure 14-8 Use the decision tree to determine whether Microsoft should deter Toshiba from entering the market for electronic book readers (e-readers). Assume that each firm must earn a 20% return on investment to break even
Explain Microsoft's decision process.
If Microsoft charges $249 for its e-reader, Toshiba will not enter the market because the rate of return represents an economic loss. If Microsoft charges $99, Toshiba will enter the market because it will earn a return that represents an economic profit. Because these low prices will substantially increase the market for e-readers, Microsoft will actually earn a higher return of 32%, splitting the market with Toshiba at a lower price than it would have earned having the market to itself at the higher price. In this case, charging a lower price has a higher payoff for Microsoft, even given that Toshiba will enter the market.
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Refer to the above figure. The curve reflects
A) the law of diminishing marginal product in labor. B) the law of diminishing marginal product in capital. C) the law of increasing marginal product in labor. D) the law of increasing marginal product in capital.
When governments choose to favor some industries over others, they undertake:
A. industrial espionage. B. corporate growth policy. C. corporate pricing policy. D. industrial policy.
A rise in the interest rate will generally result in people consuming more when they are old if the substitution effect outweighs the income effect
a. True b. False Indicate whether the statement is true or false
A decrease in government spending initially and primarily shifts
a. aggregate demand to the right. b. aggregate demand to the left. c. aggregate supply to the right. d. neither aggregate demand nor aggregate supply.