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Managerial economics - Assignment Example

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Short run refers to the short period when the insurance is covered i.e. at the commencement of the insurance policy. In the short run, the insurance broker/agents…
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Economics Questions Inserts His/Her Inserts Grade Inserts 7th June, Overview 5) Hire insurance rates would net agents a lot of money for agents and the reverse applies to low insurance rates. Short run refers to the short period when the insurance is covered i.e. at the commencement of the insurance policy. In the short run, the insurance broker/agents get paid for selling policy hence a lot of money is made (McConnell 82). While, the long run is the overall period till the period comes to termination. The long run has the disadvantage that the insurance policy might come to an end or the insured is compensated before the insurance term ends.
6) Firms competing in a perfect competitive market industry in most cases have little motivation for competition due to knowledge on the market dynamics (Baumol 67). As a result, their understanding of the market hampers the growth and need for incentives for developing technology. Changing consumer trends, the stature and change of traditional target markets could encourage development of research so that these trends can be monitored and dealt with effectively. For instance, young people are difficult to understand since they change their trends and preferences dynamically (Baumol 68).
Applied Problems
1) a) MTA is monopolistic in the New York Area and it poses a great deal of control over the transport market in the New York Area. This is because despite the drop in the vehicle numbers, MTA still had the opportunity to increase the toll charges for accessing and using the roads and bridges. This strategy and move is a monopolistic move since it does not conform to the rules of demand and supply (Baumol 70).
b) MTA could set small toll charges for them to maximize on profit to be realized in using the toll service. This is because this strategy would not increase the expense but it would lead to increased revenue. Increase in vehicles numbers is related to the reduced toll charges (McConnell 46).
c) The best decision would be to lower the tolls fees because this would the help in increasing in the customer/vehicle numbers (McConnell 91). On the other hand, increasing the vehicle numbers would make more money through revenues to MTA.
2) a) The strategy of increasing the ticket prices could work for QuadPlex in its push to make more earnings and profit. This is because; QuadPlex theatre enjoys monopoly in the cinema business in Idaho Falls.
b) The market power for QuadPlex can be measured through the number of people who visit the cinema hall and the other alternatives forms of entertainment eating on QuadPlex’s sales (Baumol 61). Moreover, customer numbers and revenues would be a strong indicator for measuring the power of QuadPlex.
c) The best options for QuadPlex would be to open another branch in Cedar Bluff Twin so that it could grow its market share. Moreover, the cinema could start renting out videos to increase sales outside the cinema business (McConnell, 44). This could help the business make revenues and derive benefits accrued from economies of scale. Expansion of business and offering wide array of good would be important for QuadPlex (McConnell 63).
Works Cited
Baumol, William and Blinder, Alan, 2011 Economics: Principles & Policy. New York, NY: Kogan Page Publishers.
McConnell, Campbell, Brue, Stanley and Flynn, Sean, 2011. Economics. Chicago, IL: Edward Elgar Publishing. Read More
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