Essay About Total Revenue And Increase Profit

Bus3003 – Economics Assignment
Name: Wong Ka HoProgram Code/ Class: BA124002/1BStudent I.D. Number: 130773697Homework Title: BUS3003 Economics – Assignment 2013/14Question 1a)Price(P, $’000)Quantity  (minutes)Total Revenue (TR, $’000)Marginal revenue (MR, $’000)Total cost (TC, $’000)Marginal cost (MR, $’000)Average total cost (ATC, $’000 per minutes)901009000/5000/508012096003055002545.87014098001057001040.7601609600-1060001537.5501809800-3064002035.7b) The marketing structure of the television broadcasting industry is Oligopoly. The reason why it is Oligopoly is because first of all, there are only a few sellers (firms) in the industry, which there are only 3 in total and that is not rigid for competition. Secondly, there are barriers to entry which is legal since the government only allowed 3 licenses for the television industry and won’t allow others to enter. Finally, it is temptation to cooperate since small numbers of competitors provide the incentive of firms to collude to limit output, raise price and increase profit, which in the firms they are not allowed to charge audience subscription fee, but allowed to make revenue profits from playing commercial advertisements from other firms.c) The profit-maximizing level of the output of the firm is 140 minutes, and the economic profit is: TR – TC= $(9800 – 5700)’000= $4100000d) From the results in c), there will not be any firms entering the market. Although there are economic profits earned from the industry, the government has already sustained a policy of limited licensing, so there would not be any alternative firms entering the industry unless the government allows more licenses offerings.e)i) Collusion is a formal or tacit agreement to limit competition by setting output quotas, fixed prices and limited promotion.