How can a firm be made better off by limiting its options?
What will be an ideal response?
By limiting its options, the firm commits to a certain strategy. The strategy is now viewed as credible by potential competitors. For example, an oversized plant commits the firm to a large level of output. Its threat to overproduce in the face of entry is now viewed as credible.
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Suppose Company P could create a socially beneficial product if they were sure they could make a profit by doing so. What could the government do to help them?
a. Grant a patent to Company P to eliminate competition for a period of time. b. Pass legislation requiring Company P to create the product. c. Place a restriction-of-trade tax on Company P if they fail to create the product. d. Seize the plans for the product and create the product in a government facility.
Which of the following indicates the number of workers who are willing to work but are unemployed at the optimal union wage rate in Figure 31.1?
A. 22. B. Zero. C. 14. D. 6.
Exhibit 1A-1 Straight line
As shown in Exhibit 1A-1, the slope of straight line AB:
A. decreases with increases in X. B. increases with increases in X. C. increases with decreases in X. D. remains constant with changes in X.
Supply-side economics focuses on the
A. size of the tax multiplier. B. marginal tax rate. C. average tax burden. D. federal income tax share of GDP.