Market power-the ability of a firm to profitably raise prices above marginal cost. Sources of market power: maintenance of market power requires barriers that prohibit or restrict entry of new firms
The Law of Supply Firms are willing to produce and sell agreater quantity of a good when the priceof the good is higher. This results in a supply curve that slopesupward
The Cost of Taxation How do taxes affect the economic wellbeing of market participants? It does not matter whether a tax on a goodis levied on buyers or sellers of the good… the price paid by buyers rises, and theprice received by sellers falls
1. Reasons for Issuance of LongTerm Liabilities Debt financing may be the only availablesource of funds. Debt financing may have a lower cost. Debt financing offers an income taxadvantage. The voting privilege is not shared. Debt financing offers the opportunity forleverage
Software is intangible Hard to understand development effort Software is easy to reproduce Cost is in its development —in other engineering products, manufacturing is the costly stage