...Potato Chip Monopoly ECO204: Principles of Microeconomics A monopoly is an industry composed of only one firm that produces a product for which there are no close substitutions and in which significant barriers exist to prevent new firms from entering into the industry (Case, 2009). In a different definition, it can be distinguished by a lack of financially viable competition to produce the goods or services as well as to substitute goods. Monopolies often refer to a procedure by which a company could gain a determinedly larger market than what would be expected under an ideal competition. This paper will emphasize on several components such as how a monopoly can benefit towards stakeholders or owners. Also, how the changes could take place according to price and output of the goods and services in a particular market place and how the market structure can be beneficial to the Wonks potato chip monopoly. This paper addresses a particular incident regarding a company called “Wonk” that produced potato chips. In 2008, two lawyers started acquiring aggressive potato chip firms with the plan to create a monopoly firm ‘Wonk’. From this perspective, those lawyers hired a consulting firm to manage and estimate the long-run competitive stability of this firm as monopoly. Again, with rule of marketplace a monopoly is a company which produces goods and services for which there no substitution in that particular area to compete for those certain products or services and prohibits...
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...Microeconomics has a role in society as well as in the economy of a region. This field of study allows economists to determine not only the patterns of consumers, businesses, and other organizations that are spending money but also the factors that are affecting spending habits and production decisions. Microeconomics involves studying the concepts and ideas that establish supply and demand in a particular market and the way that consumers and businesses alike prioritize their spending. Essentially, the role of microeconomics is to determine how, when combined, small economic components are affecting the broader economy. Instead of looking at market indicators that represent a wide field of data, however, this type of study considers how individuals, households, or specific markets are responding to markets. Although this economic approach does not necessarily reveal or determine economic conditions, the process offers insight into the way that consumers and businesses alike decide the value of a particular product or service. This is expressed in the amount of resources that either the consumer or business dedicates to an item. Rather than tallying the way that consumers as a whole are responding to a particular product, for instance, microeconomics begins with the study of the extent of demand stemming from one single consumer. Once this demand has been determined, this study continues and expands to include a greater number of individuals in the assessment. Economists also...
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...Monopoly The central theory in all of the profit-maximizing outcomes rests on the idea that marginal revenue should equal marginal cost. The same is true in the case of a firm with monopoly power. Before we discuss the profit-maximizing outcomes, it is important to understand what is meant by monopoly and how does it affect revenues and costs. A firm has a monopoly if it is the only supplier in the industry of that particular product or products. Moreover there are no close substitutes. Therefore the consumers in this market have no choice but to buy from that one firm or not at all. For this reason, the monopolist is known as a price-maker because it has the opportunity to set prices at any desired level (Mankiw, 2000). Monopolies occur largely because of the existence of barriers to entry in a given industry. These barriers include legal barriers (patents and licenses), economic barriers and natural barriers. Under legal restrictions, government allows anyone firm a special right to manufacture or trade that particular product. This happens usually when a firm acquires a patent or a special right to market that particular product. Also sometimes the government would grant any one organization to dominate an industry such as a telecom firm that happens to be the only firm providing telecommunications services. Other barriers include control of a scarce resource or input as in the case of the South African diamond syndicate. Technical superiority as in the case of Microsoft...
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...market (Author’s name) (Institutional Affiliation) Macro economic theories Microeconomic involves the study of people and the decisions of businesses in an economy. The decisions regard the allocation of scarce resources to the unlimited wants of humans. Microeconomics concentrates on the supply and demand of goods in the economy (Frank & Bernanke, 2004). The forces of demand and supply control the prices of goods and services. On the contrary, macroeconomics looks at the behavior of the economy in general. It does not concentrate on particular companies and industries. Macroeconomics looks at the factors that affect the economy. On the other hand, microeconomics focuses on how a particular company can maximize profits while experiencing low costs. It deals with how firms can maximize their profits. Microeconomics aims to analyze market mechanisms to establish the price of goods in an economy with scarce resources. It deals with market failure, where the market does not produce satisfactory results. Microeconomics describes the theoretical conditions that are necessary for a perfect market competition (Mankiw, 2012). In this, case the demand increases when the prices of the commodity goes down. Legalizing marijuana will impose taxes on the product and prices will go up. The prices of marijuana will increase, it will affect the demand of the product will fall. Supply of marijuana at this moment will increase because suppliers hope to...
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...identify two microeconomics and two macroeconomics principles or concepts from the simulation, and explain why each principle or concept is in the category of macro and microeconomics. The analysis will identify at least one shift of the supply curve, and one shift of the demand curve from the simulation and what causes the shifts. The analysis will show for each shift, how it would affect the equilibrium price, quantity, and decision making. It will detail application to learned material about supply and demand from the simulation to workplace or real-world product. It will detail how concepts of microeconomics help understand the factors that affect shifts in supply and demand on the equilibrium price and quantity, and it will also detail how concepts of macroeconomics help understand the factors that affect shifts in supply and demand on the equilibrium price and quantity. The analysis will explain how the price elasticity of demand affects a consumer’s purchasing and the firm’s pricing strategy in relation to the simulation. The first microeconomic concept the simulation deals with is a monopoly. Good Life is the only apartment complex in Atlantis at the beginning of the simulation. The company has no other competition and can set the market price at whatever the company wants at that time. A monopoly is in the category if microeconomics because it is singular in structure, whereas it only produces one thing or group of like things. The second microeconomic concept the...
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...Microeconomics and the Laws of Supply and Demand Eco 365 Instructed by: The purpose of this paper is to review and discuss how the principles of both macroeconomics and microeconomics are pertinent to many aspects of our daily lives in ways that a mass majority of individuals has never stopped to think about. The discussion herein is based on a simulation involving rental apartments in Atlantis that are all owned by the same company known as Goodlife. It is important to anyone individual or company in their growth to know when to know what a good price is, when to spend money, when to save money, and what to do in between, and to do so you must understand the concept of supply and demand and how to utilize the information. Most people understand the basic aspects of this; however, to be effective one must know the importance of how both macro and microeconomics are to our ways of living. Further at it relates to the simulation, discussions in this paper will consist of identifying both a supply and demand curve and explain what happens when a shift takes place as well as their different areas of impact. Lastly, I will discuss price elasticity and how a persons spending. Macro and Microeconomic Principles Here is a quick review of two important terms and definitions. Pursuant to Colander (2013), “Macroeconomics is the study of the economy as a while” and “Microeconomics is the study of how individual choices are influenced by economic forces”...
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...Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is correct? A) By and large, managerial decisions are not affected by either microeconomic or macroeconomic forces. B) Managerial decisions are affected primarily by macroeconomic forces. C) Managerial decisions are affected by both microeconomic and macroeconomic forces. D) Managerial decisions are affected primarily by microeconomic forces. 1) 2) Walmartʹs decision in 1994 to continue operating stores in specific cities in Mexico when other firms were pulling out would be best classified as: A) a microeconomic decision. B) a macroeconomic decision. C) both a microeconomic and a macroeconomic decision. D) neither a microeconomic nor a macroeconomic decision. 2) 3) Which of the following would be considered an example of a macroeconomic problem? A) Should Microsoft reduce the price of its Windows operating system? B) Should JP Morgan Chase increase the interest rate it charges its credit card customers? C) Should Mitsubishi eliminate one of its production shifts? D) Should the federal government extend the eligibility period for unemployment benefits? 3) 4) Walmartʹs entry into the market in Mexico had the effect of: A) reducing competition and raising the prices of many of the goods it sells. B) increasing competition and raising the prices of many of the goods it sells...
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...Supply and Demand Simulation ECO/365 The simulation addressed many factors including supply and demand in the big picture of both microeconomics and macroeconomics. GoodLife Management is a company that manages rental complexes and has a monopoly of sorts in that it is the only company that rents at seven certain complexes. As Lintech, a new company moves to Atlantis an increase in the demand for housing causes some change in both prices and supply. A good example of one principle of microeconomics in the simulation is the concept of reaching equilibrium, where supply and demand (opposing forces) cancel each other out (Colander, 2010). When Lintech moves to Atlantis there is a sharp increase in which a surplus on the market caused a downward pressure on the price. At that time there was no shortage or surplus because equilibrium was reached. Another principle that demonstrates microeconomics is that of opportunity costs. During the simulation Lintech, a large company moves in to Atlantis which causes the demand for rentals to increase. Opportunity cost is essentially what you give up to attain what you desire (Colander, 2010). The concept of employees of Lintech needing to travel to and from Atlantis and giving up other things in order to either accommodate the travel time and expense or accommodate moving to the city of Atlantis to be closer to work brings to mind opportunity cost. A principle of macroeconomics that is shown in the simulation is when the government...
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...ECO/365– Principles of Microeconomics– Final Exam Study Guide How to Use this Study Guide – READ ME FIRST The following study guide will NOT have the same exact questions on your test! However, this study guide WILL help you ace the Final Exam. The guide covers the same topics and will help you gain a deeper understanding of the concepts. Best of all, you are still guaranteed a score of 90% or higher or your money back! Tip #1: Use CRTL+F to search a related keyword to quickly find the topic you need. Tip #2: If a topic is missing, please email us at support@accnerd.com. We can usually provide immediate custom support during normal business hours. 1) Concert ticket prices increase by 5%, while attendance decreases by 2%. What is the elasticity of demand for concert tickets? 0.4 Explanation: In this problem, elasticity of demand is calculated as 2 divided by 5. 2) How is microeconomics different from macroeconomics? Microeconomics covers the choices made by individuals. Macroeconomics covers the total economy’s performance. Explanation: Microeconomics is about individual choices, while Macroeconomics is about the overall economy. 3) What type of research contains the relationship between the money supply, interest rates, and inflation rates? Macroeconomic Explanation: Factors that affect massive groups of people are considered macroeconomic research. 4) Oil prices started rising in the 1990s. Much of the supply was met from sources that were non-OPEC...
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...between macro economics and microeconomics. The circular flow of the economy is influenced by mesoeconomics. Competitions for online banking customers are intense among top U.S. banks; because of increased unemployment, credit crisis and the overall poor health of the U.S. economy. Marc Trudeau states “Americans have less cash, are spending less and have experienced a significant decline in the value of their assets. There are shifts in the way consumers manage their finances online.” Less frequent visits to banking websites, has significant implications for banking marketers trying to reach new customers. Consumer spending is at its all time low with the poor health of the U.S. economy. However, Wal-Mart and Target are competing for consumers who spend less money, because both companies are serious about keeping prices low. In addition, Dollar General, Family Dollar and Radio Shack have reemerged their low prices to compete with Wal-Mart and Target stores. This strategy stops Wal-mart and Target from becoming a monopoly. Although low prices are important to both stores, changes in brand images are the indicator of which store has quality products for lower prices. Essentially, in my two current events, the consumers are a representation of microeconomics. The top U.S. banks, Target and Wal-Mart are representations of macroeconomics. Competition and monopolies represent the concepts of mesoeconomics that bridge the gap between microeconomics and macroeconomics. Ultimately...
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...Economics, Microeconomics - Other Microeconomic issue Consists of performing application-oriented exercises wherein the specific economic principles learned in this course are put to practical use. You must translate your ideas into economic analysis using the specific economic theory and economic terms. Choose of one topical microeconomic issue out of two possible alternatives. Choose one of the following two microeconomic issues: 1. Everyone's Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. Be sure to cite any references used. 2. Ethical Issues in Business. It seems that every day lately we are confronted with a new company that has acted at least unethically and possibly illegally in the operation and financial reporting of their company's business dealings? Briefly discuss one of these issues. How would you expect this to affect the equilibrium price and equilibrium quantity for this company's products and services? Is the elasticity of demand or supply affected? What about the effect on production levels and costs? Are ethical issues more likely to occur in one market type rather than another market type? You don't have to cover all of these topics. Created: Jan 11, 2010 1:29 pm Solution By OTA: 105368, Zaitun Mogri...
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... March 6, 2012 Author’s Note This paper was prepared for Economics 100, taught by Professor Olanrewaju. MACROECONOMIC FACTORS AND THE ECONOMY 2 Abstract This paper discusses about how a monetary policy causes specific macroeconomic factors such as GDP, interest rates, inflation, and unemployment. It contains how monetary policies differ in managing an economy. It includes the proposed circumstances why or what would have happened if the monopoly was successful. MICROECONOMIC FACTORS AND THE ECONOMY 3 Introduction What happens around the globe affects us and our families in ways that are uncontrollable in previous years. Today, we faced with many layoffs and cut back production and flooded with business-and economics-related articles about massive layoffs and limited resources by which we all live by. It just a matter of time when the economic crisis became a political and social crisis. When people became unemployed, President Obama signed off a proposal in extending their benefits where they can meet their financial obligations. Over half of the unemployed are currently going to colleges and universities since the job markets have grown larger. The reason is because the businesses...
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...links among countries, making it cost effective—even efficient—to establish computer help centers in Bombay to service customers in Boston, or to hire programmers in Buenos Aires to make websites for companies in Stockholm 2. both the government and the Fed have taken proactive roles to mitigate this economic contraction. The overarching goal is controlled, sustained growth, and both fiscal and monetary policy can help achieve this objective. 3. microeconomics. Macroeconomics is the study of a country's overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies. While macroeconomic issues may seem abstract, they directly affect your day-to-day life, influencing key variables such as what jobs will be available for you, how much cash you'll actually take home after taxes, or how much you can buy with that cash in any given month. Microeconomics focuses on smaller economic units such as individual consumers, families, and individual businesses. Both macroeconomics and microeconomics have played an integral role in the global economic crisis. 4. While the free market drives performance in the American economy, the federal government and the Federal Reserve can help shape performance. During the recent crisis, both the government and the Fed have taken proactive roles to mitigate this economic contraction. The overarching goal is controlled, sustained growth, and both fiscal and monetary policy can help achieve this objective...
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...Week 7 assignments Task 1: Consider the following table of costs for the Winsome Widget Factory, which operates in a perfectly competitive market. The market price faced by this firm is $6.00 per widget. a. Fill in the formula for AFC, AVC, ATC, MC, TR, MR, and Total Profit at the top of the column in the gray section within the table. b. Fill in the missing values for TFC, TVC, AFC, AVC, ATC, MC, TR, MR, and Total Profit in the blue sections of the table. | Winsome Widget Factory | |Output |Total Fixed Cost | |Barnes & Noble books |-4.00 | |Coca-Cola |-1.22 | |Cigarettes |-0.25 | |Beer |-0.23 | |Gasoline |-0.06 | In your project, address the following questions: Using the elasticity estimates in the table above, classify the price elasticity demand as elastic or inelastic. Explain your reasoning. Explain the implications of those classifications on tax revenue collections when the per-unit tax increases as opposed to decreases. Using those classifications, make some assumptions regarding tax incidence. For instance, will buyers...
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...Is competition necessarily beneficial for consumers? Niall Douglas Firstly, I shall summarise the Neo-Classical Economic interpretation of the maximisation of social welfare through the concept of perfect competition versus monopolies. Secondly, I shall state a range of empirical evidence drawn from various sources negating the Neo-Classical interpretation, from which it shall become clear in what situations the Neo-Classical model fails. Lastly, I shall outline a game theory explanation of the typical case where monopoly invariably outperforms competition. The Neo-Classical Economic Interpretation According to this interpretation, social welfare (in the sense of maximising allocative efficiency1) is maximised only under perfect competition where infinitely tiny (relative to all other competing) firms are price takers2. In contrast, monopolies, whom are price setters through their ability to affect their market, create a deadweight loss to society as output is lower than is socially optimal3. This model is summarised by the top graph in Figure 1 below where Pm and Qm are aggregate equilibrium price & quantity for monopolies and Ppc and Qpc are for perfectly competitive firms. The graph on the bottom is that for a single perfectly competitive firm, with its straight line fixed price. 1 By ‘allocative efficiency’ I mean reaching a Pareto Efficient Optimum whereby any further change would make the aggregate of consumers and firms (ie; society) worse off according...
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