In the 1960s, Each Firm in the Computer Industry Was

question 117

Multiple Choice

In the 1960s, each firm in the computer industry was able to make extremely large profit margins, some as high as 50-60%.The margin decreased to 20-40% in the 1970s and to 10-20% in the 1980s.We conclude that:

• A)Market power increased in the two decades.
• B)The industry has evolved from oligopolistic to a more competitive industry in the two decades.
• C)Lower profit margins were due to the government's regulation to protect consumers.
• D)Lower profit margins were largely due to the mal-management of computer firms.

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Definitions:

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activity.

Industry Supply Curve

A graphical representation showing the relationship between the price of a good and the total output of the industry at various prices.

Input Price

The cost associated with procuring the resources needed for production, such as raw materials, labor, and machinery.

MC = MR

The condition where marginal cost equals marginal revenue, often used as a profit maximization rule for firms.