torturedfungus
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Hello, just wondering; does the profit a company/firm (e.g. BlackBerry) makes equate to the normal profits and supernormal profits added together?
Thanks in advance!
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shona_x.
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Normal profits where AC = AR. Anything above this earned is supernormal profits. A firm earning supernormal profits therefore should be earning normal profits as well.
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Zürich
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(Original post by torturedfungus)
Hello, just wondering; does the profit a company/firm (e.g. BlackBerry) makes equate to the normal profits and supernormal profits added together?
Thanks in advance!
The profit any firm makes is the sum of these two.
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RowanL
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If blackberry has some monopoly power then their profit will be the sum of the normal and supernormal profits. However, you might argue that the mobile phone market is very competitive and that Blackberry only has a relatively small market share. Therefore, Blackberry would only be making normal profits as in a competitive market supernormal profits are equal to zero.
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js93
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I would be interested to hear you try to make the case that the mobile phone market is a competitive one.
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RowanL
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(Original post by js93)
I would be interested to hear you try to make the case that the mobile phone market is a competitive one.
Firstly, for the purposes of economics A level it is more important to show that you understand the concepts and the easiest way to do that is to consider what would happen under different circumstances.

Secondly, I'm not saying it is perfectly competitive but given no firm has higher more than 25% of the market, it is unlikely that any one has significant monopoly powers. When I say the mobile phone market it is important to note that I mean for handsets, which is completely separate from their contracts.

http://cdn.macrumors.com/article-new...ner-sales1.png
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js93
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I disagree with you less now I know you meant the market for handsets only. None the less, I would personally argue that 3 companies holding 50% of a market with no other big players is extremely far off a competitive market. We will agree to disagree. I take your point about A level just being an understanding of the concepts.
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RowanL
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Take your point, it is defintely questionable. I would write a different answer if I were working on it during my degree tbh and say that taking market share like that is too simplistic for the market because the market is split into low/medium/high level phones and in different countries certain firms do have monopoly powers. I just meant for the purposes of this question it shows the evaluative marks that you need for level 4/5.
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Oce-SH
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(Original post by js93)
I disagree with you less now I know you meant the market for handsets only. None the less, I would personally argue that 3 companies holding 50% of a market with no other big players is extremely far off a competitive market. We will agree to disagree. I take your point about A level just being an understanding of the concepts.
Exactly its more like an oligopoly or monopolistic competition.
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