The strong form of the Say's law stated that the "costs of output are always covered in the aggregate by the sale-proceeds resulting from demand". Keynes argues that this can only hold true if the individual savings exactly equal the aggregate investment. While Classical economics believes in the theory of the invisible hand, where any imperfections in the economy get corrected automatically, Keynesian economics refuses the idea. Keynesian economics does not believe that price adjustments are possible easily and so the self-correcting market mechanism based on flexible prices also obviously doesn't. The Keynesian economists actually explain the determinants of saving, consumption, investment, and production differently than the classical economists.
Pure Monopoly 333 ANSWERS TO END-OF-CHAPTER QUESTIONS 22-1 “No firm is completely sheltered from rivals; all firms compete for the consumer dollars. If that is so, then pure monopoly does not exist.” Do you agree? Explain. How might you use Chapter 18’s concept of cross elasticity of demand to judge whether monopoly exists? Though it is true that “all firms compete for the dollars of consumers,” it is playing on words to hold that pure monopoly does not exist.
• 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).
By regulating these prices they make sure that companies are not taking advantage of consumers. The regulations also protect companies by regulating the competition therefore it lessens the effects that competition has on other companies. (McConnell, 2008, p. 583) The entities affected by industrial regulation are oligopolies and natural monopolies. (McConnell, 2008, pp. 589-590) A natural monopoly is where one company produces a product at a lower cost to the consumer than any other company.
Monopoly is where only one company is providing a good and or service. Businesses may maximize profit in each market type by agreeing upon a lay down price. Perhaps businesses cannot agree upon a set price then the price is going to be above marginal cost. If the company is in competition with other companies in the same market, making decisions about prices, how they advertise, output, etc, can influence the profits of every, if not all companies in the same market. This is where management gets involved to ensure the company that their strategic way of thinking and planning can and will allow the company to gain
Lastly organizations must all seek the greatest profits meaning nothing else but profits. When these conditions are meet which isn’t often, organizations can supply goods following their own self-interests in a predictable manner to the market. Suppliers utilize the demand curve to determine the amount of productivity and the right cost for the market. The requirement that all the firms are large ensures no organizations will be able to gain more than another. These types of conditions keep firms from monopolizing the market.
Roosevelt felt some trusts were integral to the economy, and actually worked to preserve them. The way Roosevelt saw it, trusts that increased the prices of their products purely to increase profit margins weren’t helpful in any way, however trusts that kept reasonable prices and benefitted the economy could be considered positive. Hoping to disband bad trusts
Capitalism relies on competition for resources and a system of checks and balances. Individuals can compete against others to provide the best goods and services, at a price people are willing to pay. Those who do are likely to succeed, those who do not will eventually fail and leave the marketplace (Diffen). Capitalists believe that society is better off with the free market determining economic winners and losers rather than the government. Capitalist systems general goal is low taxes.
Social Darwinism adapted Charles Darwin’s theory of evolution, “survival of the fittest,” to the business world, arguing that competition was necessary to foster the healthiest economy (just as competition in the natural world was necessary to foster the healthiest, or fittest, species). Proponents of social Darwinism adhered to a “help those who help themselves” philosophy: government shouldn’t invest in programs for the poor, because the poor had no positive impact on the nation’s financial health. The rich, meanwhile, were strong, hard working citizens who contributed to national progress, and, as such, should not be subject to government regulation. Prominent social Darwinists included Herbert Spencer and Andrew Carnegie, whose essay promoting free market economy, “The Gospel of Wealth,” was published in
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