Refer to the “World View” below: World View: Flat Panels, Thin Margins Rugged Co

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Refer to the “World View” below: World View: Flat Panels, Thin Margins Rugged Competition from Smaller Brands Has Made the TV Sets Cheaper Than Ever Like just about everyone else checking out the flat-panel TVs at Best Buy in Manhattan, graphic designer Roy Gantt came in coveting a Philips, Sony, or Panasonic. But after seeing the price tags, he figured a Westinghouse might be a better buy. . . . It is just one of more than 100 flat-panel brands jamming the aisles of retailers such as Best Buy, Target, and Costco. The names on the sets range from the obscure (Sceptre, Maxent) to the recycled (Polaroid). The free-for-all is a boon to the millions of Americans who want to trade in their bulky analog sets. . . . For many in the industry, though, the competition is brutal. Prices for LCD sets are falling so rapidly that retailers who place orders too far in advance risk getting stuck with expensive inventory. Circuit City Stores Inc. cited plummeting prices in its February 8 announcement that it will shutter nearly 70 outlets. . . . All Outsourced Nowadays LCD makers will sell to anyone, and the rest of the needed parts—tuners and computer chips—are available from multiple suppliers. Contract manufacturers will happily assemble all the pieces at factories in China, Mexico, or Taiwan. So the only things you need to become an instant player are strong relationships with suppliers, connections at big retailers, and a handful of engineers to design the sets. -Pete Engardio Source: BusinessWeek, February 26, 2007, pp. 50-51. Used with permission of Bloomberg L.P. Copyright © 2015. All rights reserved. (a) How many brands entered the flat-panel TV market between 2002 and 2007? Instructions: Enter your response as a whole number. (b) What will economic profit be in the long run? Instructions: Enter your response as a whole number. $ (c) The number of firms producing TVs will increase decrease stay the same between now and then

Explanation / Answer

(a) As much as 100 brands entered the flat-panel TV market between 2002 and 2007.

(b) In the long run, as there is an entry of firms, the supply will increase and competition will decrease the price further so that the economic profit in the long run will be $0.

(c) The number of firms producing TVs will stay the same between now and then because currently there are profits so there is no tendency for them to exit in the long run.

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