All companies cannot dictate the price of the products. Imperfect Competition also known as Monopolistic/Competitive market is the complete opposite of Perfect Competition. Imperfect Competition means that all companies have the power to dictate prices of product and all companies are able to join the same business if the revenue is up. Oligopoly is when a small group of companies control a specific market. Monopoly is where only one company is providing a good and or service.
et powerECO204: Homework Assignment 3 1. True, False, Uncertain a. A firm that enjoys economic rents earns higher economic profits than other firms without the economic rents. b. Relative to the perfectly competitive equilibrium, the equilibrium outcome for a market dominated by a monopsonist will be higher prices and lower levels of good demanded.
• A differentiator must control its cost structure to ensure the price of its products does not exceed the price customers are willing to pay for them • When differentiation stems from the design or physical features of the product, differentiators are at great risk of being imitated ▫ Example? • When differentiation stems from superior service or reliability, or from any intangible source a company is much more secure. ▫ Example?
This occurs with first degree price discrimination as consumers must pay the maximum that they were willing/able to pay, which may lower their real income. Moreover, the consumer surplus that they would have obtained at a lower price is transferred to the producers meaning that the producers gain at the expense of the consumer, which is definitely undesirable. On the other hand, although the consumer may be disadvantaged, the producer is likely to benefit from the price discrimination in this way, especially if the firm is a dominant or monopoly firm, as it has the ability to set prices higher than they would be in a perfect competition model. Higher prices means that the firm’s revenue will increase, and it is likely that their profit will too, as monopolies are able to extract consumer surplus and transfer it into supernormal profits. Consequently, these profits can be reinvested into the
Sometimes, there are many sellers in an industry and/or there exist many close substitutes for the goods being produced, but nevertheless firms retain some market power. This is called monopolistic competition, whereas in oligopoly the main theoretical framework revolves around firm's strategic interactions. (Gordon, 2009) Unique Characteristics Monopoly: • Single seller: • Market power: • Firm and industry • Price Discrimination Perfect Competition: • Infinite buyers and sellers • Zero entry and exit barriers • Perfect factor • Perfect information • Zero transaction costs • Profit maximization • Homogeneous products • Constant returns to scale Oligopoly: • Profit maximization conditions • Ability to set price • Number of firms • Long run profits • Product differentiation • Perfect knowledge • Interdependence Monopolistic Competition: • Many Sellers • Differentiated Products • Multiple dimensions of competition • Easy entry of new firms in the long run b) Explain why economic profits are zero in the
• A competitive firm has a u-shaped average cost curve whereas a monopolist does not. • A monopolist can influence market price whereas a perfectly competitive firm cannot. • There are many substitutes for a monopolist’s product whereas there are no substitutes for a competitive firm’s product. Want help? Click to download ECO 365 5).
(Variable costs include all costs of production, marketing, and distribution that vary with output. It excludes the cost of plant and equipment, overhead, etc.) Because the new process is unlike well-known production processes, the only reasonable alternative is to build a manufacturing plant specifically for producing these balls. your friend has calculated that this would require $4-6million of initial capital. He figures that if he can make a good case to the bank, he can borrow the
Differentiating Between Market Structures ECO/365 There are four main market structures that the majority of companies and firms are labeled under. They are; perfect competition, monopoly, monopolistic competition, and oligopoly. A perfect competition is where the price of a product or service is made by the demand of which that is being supplied. A monopoly is where a firm gains all sales due to its supply power and it prevents other firms from entering the same market. A monopolistic competition is where several firms compete in the same market offering similar products or services but the products differ which makes it not a perfect competition.
Thus, the state can spend $244 million on a project like the Charlottesville Bypass without the faintest clue as to its economic return on investment. (By my calculations, which no one has disputed, the Bypass likely will generate an ROI less than the state’s tax-subsidized cost of capital, which represents a net destruction of wealth.) Rail companies, by contrast, have rigorous investment guidelines. Typically, large private corporations won’t invest in a project unless it provides a ROI of 15% to 20% — or even higher, if the projects are
A country can be a capital (or labor)-abundant nations and labor (or capital)-scarce nations which consider their comparative advantage in technologies, input productivity, and wages of labor. Free trade can bring a lot of advantage to us; however, it does not apply in real world. Tariff and non-tariff are the tools that use to trade protection or prevent the economy from undergoing adjustment during economic stagnation. Although tariff and other restriction can concede the economic losses and using resource with less efficiency, but protectionism argue that non-economic benefit such as a national security can more than offset those economic losses. Normally trade protection is use to secure domestic industry and labor union’s economy welfare.