1. Assume you own a home remodeling company. You are presently earning short-run profits. The home remodeling industry is a raising-cost industry. In the long run, what do you anticipate will occur to?
a. Your firm’s costs of production? Elucidate.
b. The price you can charge for your remodeling services. Why?
c. Profits in home remodeling? Why?
2. Antitrust authorities at the Federal Trade Commission are reviewing your company’s recent merger with a rival firm. The FTC is concerned which the merger of two rival firms in the same market will enlarge market power. A hearing is scheduled for your company to present arguments which your firm has not raised its market power through this merger.
Can you do this? How?
What evidence may you bring to hearing?
3. Illustrate and answer in economic terms a managerial decision you have knowledge regarding (for instance one that has to be made at your place of employment). Some exs of decisions are:
• Should a company appoint temporary workers or appoint new workers to handle increase demand for the company's product?
• Should a factory purchase a new machine or improve the old one?
• What is the optimal level of parts one must order and keep on shelf?
• Should one lease or purchase a car?
• Should one rent or purchase a house?
• What must one consider when starting a new business?
Note that each of the problems above can be answered in a single sentence. The answer has implications which must affect future actions. In other words, the answer is significant and useful. In your answer, use economic language in a way which shows your understanding of the concepts of this course. This means employ economic language correctly, however also briefly elucidate the economic terms and concepts (Do not prepare for experts in business and economics).