Assignment:
Q 1. Doctor's Human Capital
Probably the most important source of capital is human capital. For example, most medical doctors spend years learning to practice medicine.
Doctors are willing to make large investments in their human capital because they expect to be compensated for doing so when they begin work. In Canada, the government nationalized the health-care system and reduced doctors' compensation. Is this a form of post-investment hold-up?
Q 2. Elasticity of T-shirt Sales
George has been selling 5,000 T-shirts per month for $8.50. When he increased the price to $9.50, he sold only 4,000 T-shirts. What is the demand elasticity? If his MC is $4 per shirt, what is his desired markup and what is his initial actual markup? Was raising the price profitable?
Q 3. Scale and Scope
What is the difference between economies of scale and economies of scope?
Q 4. Brand Extensions
Suppose Nike's managers were considering expanding into producing sports beverages. Why might the company decide to do this under the Nike brand name?