Examining Perfectly Competitive And Monopoly And Oligopoly

Examining Perfectly Competitive And Monopoly And OligopolyFor the cause of enlarging our knowledge of economic science, we did this assignment. in that location ar tether main parts in it. They are Perfectly competitive, Monopoly and Oligopoly, which are really important in Economics. But not simple to learn in Economics study. The questions need us to draw graphs and use calculations for them. These questions would help us have a better get winding of them.Finding1.A number of market places are 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 market is perfectly competitive. Be sure to explain which of the six-spot 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 entere d and the winner of the auction eventually pays with her credit card. In addition to regular mail, v displaceors also use express-mail service to send the purchases to buyers if they adopt that option. eBay is different from Amazon.com, another popular e-commerce Website, in that termss on eBay are set by the negotiation between bidders and sellers, whereas Amazon.coms prices are mostly determined by sellers. It is apparent to Taobao, which is a well-known shopping website in China. ( http//baike.baidu.com/view/7777. hypertext mark-up language?wtp=tt, 2010)I believe that the eBay Internet auction market is perfectly competitive. Because it possess these four feature films There essential be many and sellers in the market, none of whom is extensive enough to influence price. eBay have kinds of sellers to satisfied distinct begs in goods of consumers. No big steadfasts jibe belittled firms.There is freedom of entry to and exit from the industry. Firms must be able to establ ish themselves in the industry easily and quickly. eBay sellers hobo entry and exit the business line depend on their wishes. Buyers and sellers posses perfect knowledge of prices. They know the market and price well. They gain lots of information about that. All firms produce a homogeneous product. For example, there are many sellers in eBay have the same product, you stick out choose one base on service or else. Marcouse, 2008)Perfect emulation requires that the following six conditions be fulfilled. In such a market, prices would normally move instantaneously to economic equilibrium.AtomicityAn atomistic market have small producers and consumers on a readyn 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 difference.Perfect and complete informationAll firms and consu mers understand the prices decide by the whole firms.Equal accessAll firms have entryed to production 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 peripheral revenuemarginal apostrophize and average kernel cost curves for a typical perfectly competitive firm and indicate the profit-maximising level of output and total profit or outlet for that firm. Is the firm in long-run equilibrium? Why or why not?Figure1This is a typical perfectly competitive firm firm graph. It is passage.Figure 2Yes. It is long-run equilibrium. Because there is a point that LRAC line, ATC line, MC line and MR line intersect.The United States Federal Communications deputation (FCC) regulates interstate and international communications, including fusi on activity within industry. Go to the FCC website at www.fcc.gov and search communication companies and answer 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 textbook support the reasons state in your answers to a and b?A a).1.A monopolist weigh downs a higher price and produces less output than a perfectly competitive firm.2.Consumers have less choice, because one product notwithstanding be produced bu one firm.3.High barriers to entry means other firms cannot enter the market.4.Governments can earn heavily tax through monopolies.5.Governments can nationalise the monopoly (make it public) and therefore can keep prices too high. 6.Government can decline entry barriers (which is not good for the monopolistic firm).7.The economy may suffer as less consumer spending may happen because of high prices charged by monopolistic firms.8.Exploitation of consumer price discrimination9.Potential for inefficiency complacency over controls on production10.costs because there is no competition11.May wishing 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 own profit.(Marcouse, 2008)b). 1.A monopoly may produce at a lower cost 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 sole provider of that good. The baron to set prices at a higher level 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 go away result in a diminish in demand, and that may subsequently lead to a fall in revenue (depending on elasticity). The majority of monopoli es 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 likely to be produced without some guarantee of monopoly cling toion.Economies of scale can be gained consumer may expediency from a lower costIn conclusion, consumers and producers supporting it, because of these several 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 m onopolist is inefficient because resources are under distri furthered 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 utterly 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 monopoli st are descending(prenominal) sloping. In perfect competition they are horizontal. But the maximizes profits point are the same, when MC=MR.(graphs from Smiths PPT, 2010)OligopolyThe organization of the oil color Exporting Countries (OPEC) is an international engagement. Go to its theatre 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 world 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 rock oil policies of its process Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of pe troleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum 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 seek unity of oil policy. And contribute to turn the oil market.These countries aim at the international situation and marketing trends of oil. They have a discussion and analysis to decide the incr easing 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 worlds oil reserves. In April 2009, 33.3% of the worlds oil production, affording them lots of overbearing 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 ordered a production ceiling of 24.84 million barrels per daylight. 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 formally agreeing to control the price and output of a product.(Smith ,2010)In some markets, producing firms or producing countries band together, commonly 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 fractional of current world output but with most of the worlds oil reserves, manipulate the price of oil by restricting 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 barrels per day, just 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 incentive 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 maximize profits, oligopolistic firms operate where MR = MC.Because of the kinked demand curve, there is a range of MC curves which equal MR a t 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 say-so for collusion among firms ( Smith, 2010)