Examining Perfectly Competitive And Monopoly And Oligopoly

Examining Perfectly Competitive And Monopoly And OligopolyFor the ca function of enlarging our companionship of Economics, we did this assignment. There argon three main parts in it. They argon Perfectly agonistic, Monopoly and Oligopoly, which be really outstanding in Economics. But not simple to learn in Economics study. The questions need us to incur graphs and use calculations for them. These questions would help us sire a better brain of them.Finding1.A number of food markets argon developing on the Internet. One of those market is eBay. Check out eBay at www.eBay.com and explain whether you believe that the eBay Internet auction sale market is abruptly warring. Be sure to explain which of the six conditions of a perfectly competitive market are met and how.A eBay is an online auction Website. Consumers use the Internet to research the goods they desire, then they look for bargains of the same products on eBay. If the products are available, a bid is entered and the winner of the auction eventually pays with her credit card. In addition to regular mail, v blockors besides use express-mail service to vent the purchases to buyers if they claim that option. eBay is different from Amazon.com, another popular e-commerce Website, in that damages on eBay are set by the negotiation amid bidders and sellers, whereas Amazon.coms prices are intimatelyly ascertaind by sellers. It is homogeneously to Taobao, which is a well- noticen shopping website in China. ( http//baike.baidu.com/ tantrum/7777.html?wtp=tt, 2010)I believe that the eBay Internet auction market is perfectly competitive. Because it be in possession of these four characteristics There must be many and sellers in the market, no(prenominal) of whom is large enough to influence price. eBay motivation kinds of sellers to satisfied distinct petitions in goods of consumers. No big firms control microscopical firms.There is freedom of accounting main course to and exit from the lab or. Firms must be able to establish themselves in the industry easily and quickly. eBay sellers house main course and exit the business depend on their wishes. Buyers and sellers posses perfect knowledge of prices. They know the market and price well. They gain oodles of information most that. All firms produce a homogeneous product. For example, in that location are many sellers in eBay have the same product, you t anointet choose one base on service or else. Marcouse, 2008)Perfect arguing requires that the following six conditions be fulfilled. In such a market, prices would commonly move instantaneously to economic equilibrium.AtomicityAn atomistic market have small producers and consumers on a constituten market, so that its actions have no important impact on others. Firms are price takers, which means that the market decide the price that they must choose.HomogeneityGoods and services can substitute perfectly, so all firms sell the same product. There is no differenc e.Perfect and carry out informationAll firms and consumers understand the prices decide by the whole firms. suitable accessAll firms have entryed to t crude oil technology. If they wanted, they could free to entry or leave.Individual buyers and sellers act independentlyThe market cannot have scope for buyers or sellers get together to have a overall view about the market price. (http//www.statemaster.com/encyclopedia/Perfect-competitionRequirements, 2010)Draw marginal revenuemarginal terms and average total monetary value curves for a typical perfectly competitive firm and establish the pay-maximising direct of output and total pro fit out or exhalation for that firm. Is the firm in long- transcend equilibrium? why or why not?Figure1This is a typical perfectly competitive firm firm graph. It is loss.Figure 2Yes. It is long-run equilibrium. Because there is a point that LRAC line, ATC line, MC line and MR line intersect.The joined States Federal communication hypothesis Comm ission (FCC) regulates interstate and international communications, including merger activity within industry. Go to the FCC website at www.fcc.gov and search communication companies and wait on the following questionsWhat reasons do consumers and producers have for opposing the merger?What reasons do consumers and producers have for supporting the merger?Does the theory of a monopolist discussed in class and the textual matter support the reasons tell in your answers to a and b?A a).1.A monopolist charges a higher(prenominal) price and produces less output than a perfectly competitive firm.2.Consumers have less choice, because one product only be produced bu one firm.3.High barriers to entry means other firms cannot enter the market.4.Governments can earn heavily tax revenue through monopolies.5.Governments can nationalise the monopoly ( puzzle it public) and therefore can keep prices also high. 6.Government can decline entry barriers (which is not good for the monopolistic f irm).7.The prudence may suffer as less consumer spending may make pass because of high prices charged by monopolistic firms.8.Exploitation of consumer price discrimination9.Potential for inefficiency self-satisfaction over controls on production10. speak tos because there is no competition11.May deficiency motivation and innovation because there is no competitionTo sum up, these 11 disadvantages of monopoly. Consumers and producers have for opposing the merger for their declare realise.(Marcouse, 2008)b). 1.A monopoly may produce at a lower be than a competitive industry. This is due to economies of scale, which a monopoly is able to exploit more than a competitive firm, as the monopoly is the touch on provider of that good. The ability to set prices at a higher direct in order to gain an abnormal profit. However, monopolistic firms are not simply able to charge a price they deem fit for the product, since it is constrained by its demand curve. A higher price result res ult in a fall in demand, and that may later lead to a fall in revenue (depending on elasticity). The legal age of monopolies are belonging to government, so tax will be higher. It can give more money to perfect public goods.Consumers may like price discrimination as it could be in their favour.There can be more control and stability in an industry if a monopoly is present. If it is a natural monopoly, it would be suitable an necessary.Encourages spending on RD which may create better products.Some products and services are not probable to be produced without some guarantee of monopoly protection.Economies of scale can be gained consumer may benefit from a lower costIn conclusion, consumers and producers supporting it, because of these some(prenominal) advantages.c). In general, I think monopolist discussed in class and textbook support the reasons stated in my answers to a.Because from a and b we can know disadvantages of monopoly are greater than advantages. It harms consumers through charging a higher price and producing a lower quantity than would be the case in a perfectly competitive situation.And a monopolist is inefficient because resources are under distri scarcelyed to the production of its product.( Smith, 2010Draw demand, marginal revenue, marginal cost and average total cost curves for a typical monopolistic firm and indicate the profit-maximising level of output and total profit or loss for that firm. Is the firm in long-run equilibrium? Why or why not? How does the profit-maximising position differ from that of a perfectly competitive firm?A This is a typical monolistic graph. It is a loss.Monopolist can make a profit in the long-run. If the position of a monopolists demand and cost curves give it a profit and nothing disturbs these curves, it can make a profit in long-run. But there is no need to distinguish between the short(p) run and long run for a monopolist.- a monopolist can make a profit in the short run and long run.- it can make a loss in the short run and long run.Smith, 2010From these two graphs we can see, the Demand and Marginal cost curves of the monopolist are downward sloping. In perfect competition they are horizontal. But the maximizes net point are the same, when MC=MR.(graphs from Smiths PPT, 2010)OligopolyThe organization of the oil export Countries (OPEC) is an international cartel. Go to its home page at www.opec.org to answer the following questionsWhat are OPECs objectives of OPFC? How does it meet those objectives?What countries are members of OPEC? What percentage of populace oil production comes from these nations? In what way is OPEC a cartel?What significant oil-exporting countries are not members? What has OPEC done to limit the effect of nonmember production on its own pricing decisions?Aa)1.In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate and unify the crude oil policies of its Member Countries and ensur e the stabilization of oil markets in order to secure an efficient, economic and regular bring home the bacon of oil color to consumers, a steady income to producers and a pretty return on metropolis for those investing in the vegetable oil industry.OPECs objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers an efficient, economic and regular supply of petroleum to consuming nations and a fair return on capital to those investing in the industry.In a word, OPEC organization is assorting with members oil policy, and unify them. Then decide to use the most suitable way to protect their own or personally benefit. (http//www.opec.org/opec_web/en/about_us/23.htm, http//www.opec.org/opec_web/en/about_us/24.htm,http//baike.baidu.com/view/24477.htm?fr=ala0_1, 2010)(1)The member countries delegates of OPEC in the OPEC meeting try unity of oil policy. And contribute to prosper the oil market.Thes e countries aim at the international situation and marketing trends of oil. They have a discussion and epitome to decide the increasing rate of economics. And also control the demand and supply of oil. (http//baike.baidu.com/view/24477.htm?fr=ala0_1, 2010)b) 1. Angola, Algeria, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, Venezuela and the United Arab Emirates.OPEC nations still have 2/3 of the domains oil reserves. In April 2009, 33.3% of the worlds oil production, affording them lots of controlling in the global market. The next largest group of producers, members of the OECD and the Post-Soviet states produced only 23.8% and 14.8%, respectively, of the worlds total oil production.Since 2009, OPEC has logical a production ceiling of 24.84 gazillion barrels per twenty-four hours. At the end of 2008, OPEC had twice reduced the output quota by a total of 4.2 million barrels to 24.8 million barrels per day. In 1996, the members countries have 76.6% of oil, 69 .7% in 2007. (http//en.wikipedia.org/wiki/OPEC, http//www.hxen.com/englishnews/world/2010-03-18/103865.html, http//www.qqkqw.com/html/cyclopedia/ziyuanzhanlve/ziyuanxingshi/2010/02/23/152105199.html, 2010)Definition1Cartel is a group of firms officially agreeing to control the price and output of a product.(Smith ,2010)In some markets, producing firms or producing countries band together, usually to restrict supply this allows them to raise prices and increase their profits or revenues the best known cartel is OPEC which restricts the supply of oil onto world world markets.OPEC countries, with less than half of current world output but with most of the worlds oil reserves, manipulate the price of oil by constraining supply.Overall, these evidence proves that OPEC did act as a cartel.(Marcouse, http//en.wikipedia.org/wiki/OPECEconomics,2010)c). 1. The oil-exporting countries which are not memebers also produced great amount. For example, Russia have the second oil produced in barre ls per day, sound less than Saudi Arabia, 9,810,000 bbl a day in 2009. United States are the third, 8,514,00 bbl a day in 2008. China is the fourth, which is 3,795,000 per day in 2008. ( https//www.cia.gov/liabrary/publications/the-world-factbook/rankorder/2173rank.html, 2008)2.OPEC cannot control the international oil market.Draw demand,marginal revenue, marginal cost and average total cost curves for a typical oligopolistic firm and indicate the profit-maximising level of output and total profit or loss for that firm. Explain why prices are stable or sticky in this model. What are the characteristics of oligopoly?This is a typical oligopolistic firm. The graph shows total profit.A1.No bonus for price increases Total Revenue will fallNo incentive for price decreases Total Revenue will fall2.Mutual interdependence is a main characteristic of oligopoly and it may cause prices to be sticky. The market price incline to remain stable, or rigid, at the kink in the demand curve.3.To max imize profits, oligopolistic firms operate where MR = MC.Because of the kinked demand curve, there is a range of MC curves which equal MR at the same price price rigidity.( Smith, 2010)1.Industry dominated by small number of large firms, but many firms may make up the industry mutual interdependence among the large firmsHigh barriers to entryProducts could be highly differentiated each large firm producing a branded productNon-price competition(e.g 4 Ps)Price stability within the market-kinked demand curveKnowledge of market is not perfect,but there is potential for collusion among firms ( Smith, 2010)