Part 1: "Market Structures and Cost Management" Please respond to the following:
Question 1
From the scenario for Katrina's Candies, determine the appropriate type of market structure for the situation in question. Cite at least four defining characteristics that have helped you reach this decision regarding the appropriateness of the chosen structure.
Question 2
Imagine that you are a manager of a chemical company. An accident has occurred in which chemicals leaked into the ground water nearby. The community is unaware of the accident. Compare the primary costs involved in cleaning up the water immediately (and thus confessing) versus hiding your culpability now and possibly paying more in the future. Predict the impact on profitability in both situations.
Part 2: Market Structures" Please respond to the following:
From the scenario, assuming Katrina's Candies is operating in the monopolistically competitive market structure and faces the following Partly demand and short-run cost functions:
VC = 20Q+0.006665 Q2 with MC=20 + 0.01333Q and FC = $5,000
P = 50-0.01Q and MR = 50-0.02Q
*Where price is in $ and Q is in kilograms. All answers should be rounded to the nearest whole number.
Algebraically, determine what price Katrina's Candies should charge in order for the company to maximize profit in the short run. Determine the quantity that would be produced at this price and the maximum profit possible.
Part 3: "Predicting Price-Setting Strategies" Please respond to the following:
From the scenario for Katrina's Candies, determine the importance of predicting the pricing strategies of rival firms in an industry characterized by mutual interdependence. Examine the common price setting strategies of airlines that use game theory. Predict the potential effects of such pricing strategies on the demand for seats, and conclude the resulting impact on the profitability of the airlines.