Record Profits Essay

620 WordsJun 24, 20123 Pages
1. We assume the market structure that best describes the situation in the poultry market is Pure Competition. The characteristics that best describes the poultry market are as follows:- • Free entry and exit New poultry firms and farmers can freely enter and exit the industry. As from the case, “new entrants into the industry would increase the supply and due to the avian flu scared the farmers to expand the production (exit)”. • Very large number The poultry market has the presence of a large number of independently acting sellers and suppliers, offering their products in large national or international markets. • Standardized product Poultry market produce standardized product (chicken and egg). Buyers view the products of Leong Hup Holdings Bhd, Farm’s Best Bhd and QL Resouces Bhd and others as perfect substitutes for product of Comsa Farms Bhd. • Price takers The individual firms exert no significant control over product price. Since each firm produces such a small fraction of total output that increasing or decreasing its output will not perceptibly influence total supply or product price. 2. After the Chinese New Year, prices have not dropped after the festive period is due to the short of supply and increase in demand. From the case, due to the avian bird flu, in the neighboring countries, there have been short of supply of poultry products in the market. Hence the neighboring consumers have shunned the poultry products and increasing the demand for imported poultry products such as from Malaysia. Thus, these changes have brought about in the increase in equilibrium price. Their combined effect is an increase in equilibrium price greater than that caused by either change separately. 3. In the short run, firms might break even (making normal profit), make an

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