FINANCIAL ECONOMICS

Financial Economics

Financial Economics

Part A

Microeconomics

A competitive firm seeks to maximise its profits. Firm “Europe S.E.” is a manufacturing firm and operates in Europe. Firm “Europe S.E.” is a typical lime manufacturing firm. Lime is a non-metallic mineral used in mortars, plasters, cements, bleaching powders, steel, paper, glass, and other products.

Diagram 1A

Diagram 1B

Question 1A

Question 1

The monopolist's profit maximizing grade of yield is discovered by equating its marginal income with its marginal cost, which is the identical earnings maximizing condition that a perfectly competitive firm uses to work out its equilibrium grade of output. Indeed, the status that marginal income identical marginal cost is utilised to work out the earnings maximizing grade of output of every firm, regardless of the market structure in which the firm is operating.

In alignment to determine the profit maximizing grade of output, the monopolist will need to supplement its data about market demand and charges with facts and figures on its costs of production for different grades of output. As an demonstration of the charges that a monopolist might face, address the data in Table. The first two columns of Table represent the market demand schedule that the monopolist faces.

Output

Price

Total revenue

Marginal revenue

Total cost

Average total cost

Marginal cost

Monopoly profits

0

€14

$0

—

€2

—

—

-2

1

12

12

€12

6

€6

€4

6

2

10

20

8

8

4

2

12

3

8

24

4

12

4

4

12

4

6

24

0

20

5

8

4

5

4

20

-4

35

7

15

-15

The monopolist will select to make 3 flats of output because the marginal income that it receives from the third unit of yield, €4, is equal to the marginal cost of making the third unit of yield, €4. The monopolist will earn €12 in profits from producing 3 units of output, the maximum possible (Winkler, 2009, 62).

Question 2

Demand/supply disequilibrium management refers to the management of fluctuating, but otherwise normal and expected demand (in terms of average demand and supply), a condition that referred to as irregular demand. This item investigates management response to short-run fluctuations in demand and provide (i.e. fluctuations that happen on a daily, every week, or cyclic basis).

Then, a short part on direct disequilibrium administration strategies is supplyd. The main body of the article deals with two additional categories of disequilibrium management strategies intelligence enhancement strategies that arm service enterprise managers with the information they need to make the marketing and managerial move. likewise, the firm may offer altogether distinct kinds of services in the off-season, installing computerized book-keeping schemes for little businesses, for example. The service establishment saves on advertising, screening, and bookkeeping costs to offset the wage premium paid to the agency (Blecker, 1999, 399). Thus, companies shift risks associated with fluctuations in demand to workers. In periods of the conceptual model in number 1, demand administration schemes and supply administration schemes decline the losses which happen throughout demand/supply imbalances.

Cross-training employees may be more expensive than utilising a specialization approach, though it should pay off in the long run. Finally, risk decrease schemes diminish exposure to the contradictory consequences of disequilibrium situations. Cross-training not only advances short-term flexibility and reduces exposure to deficiency associated with demand/supply imbalances, but also intensifies worker morale, therefore advancing ...