...Monopoly Public interest is virtual another way to describe consumers’ wants, namely, maximising utility at the lowest price and the best quality. This concept has been contributed by Jeremy Bentham and J.S. Mill referred to “the greatest happiness for the greatest number”. (Handout, 2004, the ‘public interest’) In the market structure, one extreme form, imperfect competition is known as monopoly. The following is going to discuss that monopoly is always against the public interest. To compare with perfect competition (another extreme form), the potential strengths and weaknesses of monopoly will be presented and examine which one can be best to serve the public interest. First of all, a monopoly literally means a sole seller, it occurs when there is only one firm in the whole industry. But in practice, it is difficult to exist. Thus more than 25% market share in the industry is identified as monopoly by its legal definition. Meanwhile monopoly also exists in a certain region, e.g. a local water company dominates the local market as ‘natural monopoly’ which means that market may be too small to support more than one firm to achieve significant economies of scale. A major characteristic of monopoly is high barriers to entry. For example, a specific legal barrier protects monopoly in term of patent on essential processes, copyright and licenses and so on. At the same time, monopoly protects itself from competing through a...
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...economists Patricia M. Flynn and Michael A. Quinn, the authors state: We find evidence that Economics is a good choice of major for those aspiring to become a CEO. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major. A list of famous economics majors published by Marietta College includes business leaders Warren Buffet, Donald Trump and Diane von Furstenberg. Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government? Question 2 In a mixed economy, does the government decide what goods and services should be produced? Briefly discuss the reasons for your answer. 1|Page Question 3 Explain which of the following statements...
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...Trade 10 Chapter 4 The Market Forces of Supply and Demand 13 Chapter 5 Elasticity and Its Application 20 Chapter 6 Supply, Demand, and Government Policies 26 Chapter 7 Consumers, Producers, and Efficiency of Market 31 Chapter 8 Application: The Costs of Taxation 35 Chapter 9 Application: International Trade 39 Chapter 10 Externalities 42 Chapter 11 Public Goods and Common Resources 45 Chapter 12 The Design of the Tax System 47 Chapter 13 The Costs of Production 49 Chapter 14 Firms in Competitive Markets 53 Chapter 15 Monopoly 57 Chapter 16 Monopolistic Competition 61 Chapter 17 Oligopoly 64 Chapter 18 The Markets for the Factors of Production 68 Chapter 19 Earnings and Discrimination 73 Chapter 20 Income Inequality and Poverty 76 Chapter 21 The Theory of Consumer Choice 79 Chapter 22 Frontiers of Microeconomics 82 Chapter 1 Ten Principles of Economics I. Significance * How people make decisions * How people interact * How the economy as a whole works II. Highlights The word economy comes from the Greek word oikonomos, which means "one who manages a household." A household faces many decisions, which means he/or she must allocate its scarce resources among its various members taking into account each member's abilities, efforts, and desires. No matter a household, or an economic, they have much in common. Economy permeates everywhere in our daily lift. Before study economics...
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...Discuss the problem that are likely to be faced in determining the prices to be charged for the seats? In determining the prices to be charged for the seats, problems of allocative inefficiency might arise, unfairness in the seating, administrative cost of renting the location and paying the salaries to the stuffs involved, identifying the seats from the expensive ones to the cheapest one in a fixed topography of the area, problem of resale as well. Thus, this essays plans to discuss the problems faced as mentioned above. Firstly, allocative inefficiency is one of issues in determining the prices to be charged for the seats. Allocative inefficiency is defined as a situation in which the distribution of resources between alternatives does not fit with consumer taste (perceptions of costs and benefits). By virtue of having a high degree of market power, the organiser will charge a higher price for the ticket and restrict the number of ticket seats available to the consumers. As such, the value consumer place on the last unit of ticket for the seats exceeds the marginal cost of producing it (MCm). From the welfare point of view, more tickets for the seat should have been produced, indicating that there is underproduction of the good, in this case, the number of ticket available for the seating are limited. Also, there is deadweight loss (area acd) as the fall in net benefit to the society (Area dcQeQm= Area acd) when output is not produced at the socially efficient level (Qe instead...
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...wants are unlimited, the resources available to fulfill those wants are limited. Economists assume that people are rational in the sense that consumers and firms use all available information as they take actions intended to achieve their goals. Rational individuals weigh the benefits and costs of each action and choose an action only if the benefits outweigh the costs. Although people act from a variety of motives, ample evidence indicates that they respond to economic incentives. Economists use the word marginal to mean extra or additional. The optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost. 1.2 The Economic Problem That Every Society Must Solve (pages 8–11) Discuss how an economy answers these questions: What goods and services will be produced? How will the goods and services be produced? Who will receive the goods and services produced? Society faces trade-offs: Producing more of one good or service means producing less of another good or service. The opportunity cost of any activity—such as producing a good or service—is the highest-valued alternative that must be given up to engage in that activity. The choices of consumers, firms, and governments determine what goods and services will be produced. Firms choose how to produce the goods and services they sell. In the United...
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...economy or other economies that you have studied where relevant to the question. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 4 printed pages. DC (NH) 65434/2 © UCLES 2013 [Turn over 2 Section A Answer this question. 1 The effect of oil price rises In 2011, there were big increases in oil prices which led to comparisons with a period in the 1970s when oil prices also rose steeply. In the 1970s, the macroeconomic policy used in the UK was to increase budget deficits. By contrast, in 2011, the macroeconomic policy was to try to reduce the budget deficit. In the 1970s some thought the effect of oil price increases would be inflationary while others thought the effect would be deflationary. The following points were made. In the 1970s • consumers would have to spend more on oil but they would spend less on other things. • consumers would not spend their savings. • firms could pass on the increased cost of production, caused by higher oil prices, to...
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...to the controversy caused by its use by Uber. The argument has been whether surge pricing is a disadvantage or advantage to consumers. When demand rises for a good (from Fig1 below, demand (D1) increases (D2)), the price must rise to bring the system back to equilibrium (P1 to P2) with a higher quantity supplied (Q1 to Q2). The higher cost is to encourage suppliers to meet the demand required by allocating more resources to the areas that are willing to pay the higher price P2. Hence, the higher price charged to consumers result in higher profits for firms. In this essay, I will be focusing on the effects of surge pricing and whether a ban would correct the disadvantages associated with it....
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...a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry).[2]Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods.[3] The verb "monopolise" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge high prices.[4] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4] A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly),...
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...Determine whether each of the following is an explicit cost or an implicit cost: a) Payments for labor purchased in the labor market EXPLICIT COST b) A firm’suse of a warehouse that it owns and could rent to another firm IMPLICIT COST c) The wages that owners could earn if they did not work for themselves IMPLICIT COST 3. What are economies of scale? Please give an example. What are diseconomies of scale? Please give an example. Economies of Scale: The forces which cause the firms average cost to decrease, as the level of operations increased in the long run period 4. Your rich relative died and left you $100,000, which you decided to use for your own Internet business. What will be your fixed and variable costs? Briefly discuss. Fixed cost: Costs that are independent of output and are incurred even if no output is produced; the cost when output is equal to zero. Variable cost: Cost of variable resources. 5. Explain the shape of the long-run average cost curve. How firms use the long-run cost curve to make choices about production? The shape of the long-run average cost curve is related to economies and diseconomies of scale. Economies of scale are some of the factors that cause its longrun average cost to contract as output expands. Example: use of larger equipments and the specialization of its manpower. Diseconomies of scale are factors that cause its long-run average cost to expand as output expands. Example: the difficulty of managing a...
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...Sample program for Stage 2 The purpose of this document is provide an example of how the Stage 2 units can be programmed by drawing on four of the Options from the Economics D304 subject and using them as contexts for unit 2AECO. In this sample program the options from D304 drawn on to provide contexts are Australian market forms, Firms and production and Environmental economics. While options from D304 can be used to provide contexts for the 2AECO unit, they will not be covered in their entirety (in terms of D304). Programming of Stage 2 Units using optional units from the D304 as contexts Week Content Concepts Assessment Contexts: Australian market forms, Firms and production, and Environmental economics Markets and prices The Economic...
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...about the allocation of scarce resources Examine some of the tradeof fs that people face Learn the meaning of oppor tunity cost See how to use marginal reasoning when making decisions TEN OF PRINCIPLES ECONOMICS Discuss how incentives af fect people’s behavior The word economy comes from the Greek word for “one who manages a household.” At first, this origin might seem peculiar. But, in fact, households and economies have much in common. A household faces many decisions. It must decide which members of the household do which tasks and what each member gets in return: Who cooks dinner? Who does the laundry? Who gets the extra dessert at dinner? Who gets to choose what TV show to watch? In short, the household must allocate its scarce resources among its various members, taking into account each member’s abilities, efforts, and desires. Like a household, a society faces many decisions. A society must decide what jobs will be done and who will do them. It needs some people to grow food, other people to make clothing, and still others to design computer software. Once society has allocated people (as well as land, buildings, and machines) to various jobs, 3 Consider why trade among people or nations can be good for everyone Discuss why markets are a good, but not per fect, way to allocate resources Learn what determines some trends in the overall economy 1 TLFeBOOK 2 4 Ten Principles of Economics PA R T O N E INTRODUCTION scarcity the...
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...WORKING PAPER NO: 366 Foreign Direct Investment in India’s Retail Sector: Some Issues Murali Patibandla Professor Corporate Strategy & Policy Indian Institute of Management Bangalore Bannerghatta Road, Bangalore – 5600 76 Ph: 080-26993039 muralip@iimb.ernet.in, m_patibandla@yahoo.com Year of Publication June 2012 1 Foreign Direct Investment in India’s Retail Sector: Some Issues Abstract Foreign direct investment (FDI) plays an important role in India’s growth dynamics. There are several examples of the benefits of FDI in India. FDI in the retail sector can expand markets by reducing transaction and transformation costs of business through adoption of advanced supply chain and benefit consumers, and suppliers (farmers). This also can result in net gains in employment at the aggregate level. This paper brings forth a few conceptual issues and analysis of qualitative information, data and stylized facts on these issues. Key words- India, Foreign direct investment, Retail, Supply chain, Farmers 2 INRODUCTION In applying transaction-cost logic to political aspects of the reform process in less-developed economies, Dixit (2003)) characterizes three phases in the formation of interest groups under information asymmetry: ex ante, interim, and ex post. At the ex ante stage, each individual is uncertain about his own type as well as the types of others because there is no private information. At the interim stage, each individual knows his own type but not the type...
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...questions about the economy that might spark any one’s curiosity. Why are apartments so hard to find in Mumbai City? Why do airlines charge less for a round-trip ticket? Why executive class airfare is costlier than economic class? Why are jobs easy to find in some years and hard to find in others? Why a package tour costs less as compared to individual booking of air ticket and hotel? Moreover, as one go about his/her life, he/she make many economic decisions. During student carrier one has to decide how many years to stay in school. After joining in a job, one has to decide how much of his/her income to spend, how much to save, and how to invest his/her savings. When running a small business or a large corporation, and one will decide what prices to charge for his/her products. The economic tools, which will be discussed in this course, will give you a new perspective on how best to make these decisions. Following ten economic principles can be applied in many of life’s situations, whether the future finds you reading the newspaper, running a business, or sitting in the work place. These economic principles are (i) managers...
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...EcoNomIcs mIcroEcoNomIcs macroEcoNomIcs Course Description Effective Fall 2012 AP Course Descriptions are updated regularly. Please visit AP Central® (apcentral.collegeboard.org) to determine whether a more recent Course Description PDF is available. The College Board The College Board is a mission-driven not-for-profit organization that connects students to college success and opportunity. Founded in 1900, the College Board was created to expand access to higher education. Today, the membership association is made up of more than 5,900 of the world’s leading educational institutions and is dedicated to promoting excellence and equity in education. Each year, the College Board helps more than seven million students prepare for a successful transition to college through programs and services in college readiness and college success — including the SAT® and the Advanced Placement Program®. The organization also serves the education community through research and advocacy on behalf of students, educators, and schools. For further information, visit www.collegeboard.org. AP Equity and Access Policy The College Board strongly encourages educators to make equitable access a guiding principle for their AP programs by giving all willing and academically prepared students the opportunity to participate in AP. We encourage the elimination of barriers that restrict access to AP for students from ethnic, racial, and socioeconomic groups that have been traditionally underserved. Schools...
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...towards mastery in the practice of problem solving Assessments MODULE 4 Technology 1. You are the manager of 2 small stores with production functions q = K¼L¼ and a larger store with production function q = 2K¼L¼. You hire capital for $4, labour for $1. When you took over this role, your boss told you that Q = 24 was the profit maximizing output for this multi-plan firm: 24 = q1 + q2 + q3. Now, the price of labour rises to $4. Provide (i) Isoquant/Isocost diagrams, (ii) Total Cost and (iii) Marginal Cost diagrams. Illustrate the substitution effect (point a to b) and output effect (point b to c) on these diagrams. Explain why your firm uses less capital even when the price of labour increases. (September 2010) For the production function q = K2 + L2 (A) Demonstrate that the elasticity of substitution is negative. (B) Provide a labelled diagram showing the q = 100 isoquant (C) Briefly explain what a negative value means for σ 3. 4. A special production function is q = min( 80K, 4L1 + 2L2). Discuss the production process described by this function. Is this production function constant returns to scale? Five-year-old Jack has set up a hot chocolate stand outside his home. His customers like hot chocolate made in only one way, one unit of chocolate and 3 units of milk to go into each unit of hot chocolate. Jack’s mother, Naomi, provides him with heat, cups and cleaning free of charge. However, she charges him $0.25 for each unit of chocolate and $0.50 for each unit of milk. What...
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