Now Make the Alternate Assumption That the SP Above for Both

question 35

Essay

Now make the alternate assumption that the SP above for both firms is made using a mark up of 20%. What are the implications for both firms? You should look at all the possible scenarios.

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Definitions:

Fixed Resource

An asset or input whose quantity cannot be altered in the short run for the production of goods and services.

Explicit Costs

Direct, out-of-pocket payments for inputs or resources used by a business, easily identifiable and recorded.

Entrepreneurial Talent

The unique set of skills, insight, and intuition possessed by individuals that enables them to identify and exploit new business opportunities.

Forgone Interest

The potential interest income lost when capital is invested in one project instead of being deposited in a savings account or invested in an alternative project.