Question 1.
Southwest Airlines begins a "bags Fly Free" campaign, charging no fees for a first and second checked bag. Does this situation best represent
Producer-producer rivalry? Consumer-consumer rivalry? Producer-consumer rivalry?
Explain your choice.
Question 2.
What is the maximum amount you would pay for an asset that generates an income of $ 250,000 at the end of five years of the opportunity cost of using funds is 8 percent?
Question 3
Jaynet spends $30,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm- one offer was for $110,000 per year, and the other was for $80,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 25 paintings per year at a price of $8,000 each:
- What are her accounting profits? Show your steps leading to your answer
- What are her economic profits? Show your work!
Question 4
Brazil points to its shrimp-farming industry as an example of how it can export shrimp in the world market. One decade ago, Brazil exported a meager 400 tons of shrimp. Today, Brazil exports more than 58,000 tons of shrimp, with approximately one-third of that going to the United States. Brazilian shrimp farmers however, potentially face a new challenge in the upcoming years. The Southern Shrimp Alliance- a U.S. organization representing shrimps-producing countries is selling shrimp below "fair market value." The organization is calling for the United States to impose a 300 percent tariff on all shrimp entering the United States to impose a 300 percent tariff on all shrimps entering the United States' border. Brazilian producers and the other five countries named in the complaint counter that they have a natural competitive advantage such as lower labor costs, availability of cheap land, and a more favorable climate, resulting in a higher yield per acre and permitting three harvests per year. In what many see as a bold move, the American Seafood Distributors Association- an organization representing supermarkets, shrimp processors, and restaurants- has supported Brazilian and other foreign producers, arguing that it is the Southern Shrimp Alliance that it is engaging in unfair trade practices.
- Describe the various rivalries depicted in this scenario, and
- Then use the five forces framework to analyze the industry.