Suppose there is only one producer of frames, a necessary component in manufactu
ID: 1111603 • Letter: S
Question
Suppose there is only one producer of frames, a necessary component in manufacturing computer monitors. Because of the threat of entry, this firm charges its customers a price equal to average cost. One reason that a producer of computer monitors may make rather than buy frames is
the frame supplier may be unreliable
the total cost of the components of frames is the same as the price of frames purchased in the market
the frame manufacturer has no incentive to make high-quality frames
managers at the computer monitor firm place a high value on their time
the frame manufacturer will soon go out of business because firms do not produce goods for the market that can be made in-house
a.the frame supplier may be unreliable
b.the total cost of the components of frames is the same as the price of frames purchased in the market
c.the frame manufacturer has no incentive to make high-quality frames
d.managers at the computer monitor firm place a high value on their time
e.the frame manufacturer will soon go out of business because firms do not produce goods for the market that can be made in-house
Explanation / Answer
The reason for the producer to make his own frame is that (C) charfing Price equal to average cost the firm earns normal profit and will thus have no incentive to manufacture high quality frame. And frames being an important component for monitors the producerof monitors would be willing to make the frames.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.