many years ago, the major alternative to xerography in copying was the electrofa
ID: 1189360 • Letter: M
Question
many years ago, the major alternative to xerography in copying was the electrofax copying process. Elctrofax machine used a special paper coated with a heavy wax film. Like Xerox, the electrofax companies charged a low price for the use of the machine but set a paper price per page of 4 cents. The actual and marginal cost of manufacturing paper was in fact only 1 cent per page.
A) explain the pricing policy of the electrofax producers?
B) The high markup on electrofax paper soon attracted new firms offering to supply the paper at a much lower price then the electro fax producers, how do you think electrofax would respond to the competition?
Explanation / Answer
a) Electrofax was able to charge the higher price due to the absence of competition in the market. there were no paper suppliers or were smalls, who were supplying paper at lower cost and further, market share of large.
b) competition would compel the firm to lower its paper price to the level of 1 cent per paper, since the marginal cost of paper is s1 cent. Minimum limit would be set at 1 cent per paper.
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