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Agata [3.3K]
3 years ago
12

Sarah's Machinery Company is deciding to dump its current technology A for a new technology B with smaller fixed costs but bigge

r MCs. The current technology has fixed costs of $500 and MCs of $50 whereas the new technology has fixed costs of $250 and marginal costs of $100. At what quantity is Sarah's Machinery Company indifferent between two technologies?
Business
1 answer:
Montano1993 [528]3 years ago
7 0

Answer:

The quantity that Sarah's Machinery Company is indifferent between two technologies is 5.

Explanation:

We are looking for the quantity that Sarah's Machinery Company is  indifferent between two technologies,  so we have to find the quantity that the total cost with technology A is the same to the total cost with technology B

Total cost  technology A=500+50x

Total cost  technology B=250+100x

500+50x=250+100x

500-250=100x-50x

250=50x

x=250/50=5

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1/5+ 2 1/3=<br> 7/8<br> 38/15<br> 7/15<br> 38/30
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4 years ago
g efg manufacturing has a product that sells for $15 per unit, and the marginal cost is $5.00. a. compute the lerner index for e
Hitman42 [59]

Answer:

(a) 0.667 (b) The Lerner index helps in estimating of the market power of a firm. it measures the percentage markup that a firm is able to charge.

The conditions where this market power last in the long-run are; the pricing power, Factor mobility, Barrier to entry or exist.

Explanation:

Solution

Given that:

(A) The Lerner index is computed below:

Lerner index = (P-MC)/P

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=10/15

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(B) The Lerner index assist in measuring of the market power of a firm. it measures the percentage markup that a firm is able to charge.

Index spans from a low value (0) to a higher value of (1)

When a firm has a higher value of index, it is able to charge over it;s marginal cost and thus has a greater monopoly power

Other conditions where market power last in the long run is as follows:

  • The pricing power
  • Factor mobility
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