Job/Task Analysis

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Submitted By mbash2403
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Pages 3
Chapter 5 & 6 Homework
Economics for Management

A firm in a perfectly competitive market invents a new method of production that lowers its marginal costs. What happens to its output? What happens to the price it charges? If the firm invents a new method of production that lowers its marginal costs then in turn it will be able to produce or output more. Nothing will occur to the price in which it charges as we know in a perfectly competitive market all of the firms are price takers however, since it is lowering its marginal costs it will wind up gaining a larger profit.

(a) The firm has an employee who threatens to tell all other firms in the industry about how to implement this new technique. Will it be possible to bribe the employee not to do this? Explain why or why not.
Ethically I would say no the firm cannot bribe the employee to not share the information however, if they have a code of conduct they can threaten the employee with termination. However, it is possible for the employer to bribe the employee with money as long as it is less of their economic revenue. The employee may still tell other firms in a limited quantity as by doing this it could add potential customers for this firm. (b) Why should this employee probably choose to tell only some of the other firms rather than all of them?
If the employee only tells some of the other firms rather than all of them then at least only those that she tells can benefit from the economic profit. (c) What factors will determine the best number of firms to sell the secret to? (Assume that those who get the information keep the secret instead of selling it to others.)
Factors that will determine the best number of firms to sell the secret to would be considering the marginal revenue received from each firm that is shared the information to.
10. A perfectly competitive firm faces a…...

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