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The Case:

Uniliver is a global company manufacturing and selling their products across the world. Lux soap is their popular brand that has been giving the best of beauty to women around the world since 1925. Suppose management of the company decides to launch a new beauty product having the qualities of both scrub and soap. As there are some other companies also which produces similar kind of products thats why Lux manufacturer decides to obtain a patent for this new product. The government approves the patent for this new product while confining the time period of this patent for first three years only. Lux manufacturer decide to charge Rs. 250 per unit while facing Rs. 200 as its marginal and average costs. The first year sales show a tremendous increase implying for potential of higher demands in future for this new product. Notwithstanding, after three years the company will need to adjust its price and production strategies according to the market scenario.

Requirement:

Being a student of managerial economics, analyze the above case carefully; recall the characteristics of all types of market structures discussed in video lectures; provide answer to the following questions.

  1. Identify the type of market structure in which Lux manufacturer will operate in first three years.
  2. Will Lux manufacturer earn normal profit by charging the given price for first year?

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