Managerial Economics

1. China now has changed its totalitarian forms of government. It has been through economic and political reforms. In the nowadays, Capitalism and Democracy are still two effective and efficient systems to operate the countries. Capitalism is socially desirable because of its decentralized and customer-oriented nature. Resources and products are allocated through the market force. In this way, it maximizes the utilization of the scarce resources and makes everyone better off. Democracy makes all citizens have rights to make decision for the public policies. The people have more freedoms in the market.

Overall, China had growing so fast over the last 20 years, it because China had been tending to become capitalistic and democratic.

2. (a) Fractional profit theory: IBM and apple are two companies selling PCs and high-tech products. Apple is more popular than IBM in the industry.

Monopoly profit theory: Apple has some unique patents and copy rights that other companies do not possess.

Innovation profit theory: the new inventions (ipad, itouch,iphone) make Apple benefitable.

Compensatory profit theory: the well organized company make Apple boost new generations of its products into the society. It also make profits.

Compensatory profit theory: the well organized company make Apple boost new generations of its products into the society. It also make profits.

(b)It depends. If Apple can continuously boost new products and new technologies or focus on marketing, then the customers would prefer to purchase still. In the other words, the sales would be never going down. Otherwise, its profits will fall down one day in the future.

3. Google is Internet-related products and services, including Internet search, cloud computing, software and advertising technologies. Advertising revenues from AdWords generate almost all of the company's profits. If consumers are defined as those who buy a company’s products, then who are Google’s consumers. Google’s consumers...