ECON Homework for Chapter 6

ECON Homework for Chapter 6

Question

Homework for Chapter 6, Adapted End-of-chapter Questions

(10 points
possible)

  1. Dunne,
    Roberts, and Samuelson found that industries which have high entry rates, tend
    to also have high exit rates.

    Can you explain this finding?(1 point)

    What does this imply for pricing strategies
    of incumbent firms?
    (1
    point)

  2. .0pt;’=”” list=”” lfo1;=”” level1=”” l0=”” 0pt;=””>“All
    else equal, a firm would prefer blockaded entry to deterable entry.” Explain.
     (2 points)

    7. How HEB
    behaves toward Walmart is a major determinant of whether it will face entry by
    new competitors. Explain.
     (2
    points)

    .0pt;’=”” 0pt;=””>9. Suppose HEB considers
    expanding the capacity of its fresh sushi making equipment at its stores at the
    corner of SPID & Staples and at the corner of SPID & Waldron. It can do
    so in one of two ways: (1) HEB can purchase fungible, general-purpose equipment
    that can be resold at close to its original value. Or (2) HEB can invest in
    highly specialized equipment which, once in place, has virtually no salvage value.
    Assuming that each choice results in the same production costs once installed,
    under which choice is the HEB likely to encounter greater likelihood of entry into
    fresh sushi-making by Walmart and other potential competitors, and why?
     (2
    points)

    .0pt;’=”” 0pt;=””>

    .0pt;’=”” 0pt;=””>14. Consider
    HEB selling two products, Hill Country Fare chicken fajitas and Tyson chicken
    fajitas, which substitute for each other. Suppose that Walmart introduces Great
    Value chicken fajitas, a product that seems to the typical consumer to be identical
    to Hill Country Fare chicken fajitas. Being careful to consider factors that
    may affect the following:

    .0pt;’=””>

    .0pt;’=””>(a) Will a price war be initiated? (1 point)

    .0pt;’=””>

    .0pt;’=””>(b) If so, which firm would be more likely to win the
    price war?
     (1 point)

ECON Homework for Chapter 6


 

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