Monopoly, When a firm is the sole supplier of a particular product or service then we say that it is a monopolist.
A. Define Monopoly When does a firm enjoy a dominant position in the market? Why is a firm enjoying a dominant position often associated with monopoly power? B. Why is monopoly power often considered to be detrimental to the interest of consumers? Are there any desirable features associated with monopoly? What government measures can be suitable for controlling monopoly powers. -+ ++++++++++++++++++++++---------- When a firm is the sole supplier of a particular product or service then we say that it is a monopolist. A monopolist is able to prevent the entry of competitors by means of barriers and for whose product or service there is no very close substitute therefore no one can compete against him. An example of this is the Water Services Corporation which is the only supplier of tap water in Malta and it is very difficult for other firms to start offering the same services because a lot of capital in terms of land, labour and machines are needed thus it will not be affordable. Since WSC is a natural monopoly (that is since it is under monopoly in the long-run its average costs would be lower than if it were shared between two competitors), it benefits from economies of scale and if a firm would enter the industry, and both firms would supply half the industry output, they would both face the demand curve D2 in Fig1.1. Thus there is no price that would
Monopoly: a Game or Reality?
MONOPOLY: A GAME OR REALITY A monopoly is a market structure in which there is a single firm selling a product with no close substitutes. The general perception is that corporations who monopolize industries are "fiends" who practices profit maximization means and prevent competition from existing and therefore preventing gains in productivity, efficiency, and economic development from arising. However, this assumption does not always hold true. Although monopolies are able to dictate the market price of their products and maximize on corporate gains, they often pursue other objectives such as maximizing sales, public image, and general welfare and consumer satisfaction. All of which are avenues through which the firm may maximize profits in the future. However, contrary to the title given to them, the reality is that monopolies are a stabilizing factor in our economy, and without them our society would be in chaos. Think of a world without monopolies. A place where big corporations are non-existent and all firms are indistinguishable. Although this world would be a fantasy for many small businesses, in reality it would be a nightmare. Let's look at it this way, if all businesses were to sell the same products then many problems may arise since every business is trying to sell the same products to the same consumers. Take, for instance, the example of public
The Federal Budget in Australia. The three Federal Budget outcomes are budget surplus, budget deficit and balanced budget.
THE FEDERAL BUDGET The Federal Budget is an official document that details the Governments planned expenditure and revenue for the upcoming financial year. Fiscal policy is a macroeconomic policy that manipulates the Federal Budget. Fiscal Policy is implemented through the Commonwealth Government's Budget to achieve economic objectives by influencing the level of economic activity. Economic objectives include the lowering of unemployment (NAIRU), price stability, environmental and external stability, sustainable economic growth and equitable distribution of income. These objectives can be achieved through Fiscal Policy. Fiscal Policy is extremely important in stabilizing economic growth. Through either contractionary or expansionary stances, the government reduces the impact of dramatic booms or crashes. By contracting government expenditure in times of high economic growth, the economies activity slows. This ensures that the economy maintains a steady growth level, therefore maintaining a relatively low inflation rate of between 2-3%. The Government uses Fiscal Policy to stimulate the economy when needed in order to reduce cyclical unemployment. Also, funding retraining programs lowers structural unemployment. The three Federal Budget outcomes are budget surplus, budget deficit and balanced budget. A budget surplus occurs when revenue collected exceeds government
Outline the policies used to create employment in declining areas in the United Kingdom This question means to state the government law used to make employment in areas in the UK that have no employmen
Outline the policies used to create employment in declining areas in the United Kingdom This question means to state the government law used to make employment in areas in the UK that have no employment, reasons for this is because that area was declining. When an area is deteriorating or declining the people move out because there is no employment and they want a good quality of life. The British government have tried to encourage industries to locate to declining areas, Areas that have high unemployment i.e. Scotland, Birmingham and Leeds. When an area is declining the crime rates go up because of no employment. The government does not want this therefore they have introduced several government policies to try and prevent this from happening. The first government policy introduced in 1947 was industrial development certificates. This policy stated where a business should locate. The advantage of this policy is that the business will earn a good profit; also there are more opportunities for those that are unemployed or those that were made redundant. Also businesses are required to pay business rates which are then given to the council it will mean more money for the council; with this money they could use it effectively within their borough. The disadvantage is that they don't have a choice whether to locate or not and must comply with the government. Another disadvantage
Tobacco consumption to increase until year 2010.
Commentary 1 Date of article: January 8, 2004 Title: Tobacco consumption to increase until year 2010 Source: Agence France-Presse Author: Unknown Word Count: 745 words (excluding quotes and reference to principles) According to the UN Food and Agriculture Organization, the worldwide tobacco consumption is expected to increase until the year 2010. This is especially true in developing countries. Moreover, the number of smokers is expected to grow from 1.1 billion in 1998 to 1.3 billion in 2010. Despite the rise in tobacco consumption globally, the consumption of tobacco per adult is expected to drop by 10 percent in 2010. The main causes of the increase in tobacco consumption and demand are the projected increase in population and the growth in income. The best way to reduce tobacco consumption is to use a combination of tax and direct restriction policies. Tax is a government intervention that benefits the government only; the consumers and producers are both worse off. Tax will always shift the supply curve inwards, which increases the equilibrium price. When the tax is too high, the smuggling activity increases too because people could make a huge profit out of smuggled tobacco. Normally, industries will produce at a quantity (Q*) and sell at a price (P*), where the demand curve cuts the supply curve. However, as the world's population increases rapidly and enhances
Why are less economically developed countries and more economically developed countries affected differently by flooding, and why are there responses different?
Why are less economically developed countries and more economically developed countries affected differently by flooding, and why are there responses different? Flooding has been a worldwide problem for centuries but in recent years, primarily due to global warming, the effects are becoming more and more hazardous. As a result it becomes important to recognize the significance of flooding and the varied impact it has on people around the world. Flooding affects numerous groups of people every year regardless of their country's economic status. However the intensity of the effects of flooding and what is and can be done to prevent them in the short term as well as for the future (long term) is where the difference between less economically developed countries and more economically developed countries becomes evident. For example the Mississippi river is one of the largest in the world; it travels through nine states and collects a large amount of surface run off from a large portion of the North American continent. When the river flooded in 1993 after two weeks of steady, heavy precipitation there was considerable damage to homes; many people were injured with approximately 50 deaths. However, the damage could have been much worse had the country not responded quickly with evacuation programmes, and the rapid co-ordination of agencies that informed those at risk of the
Using appropriate examples, describe what is meant by institutional factors and explain how social cost can be included in the least-cost equation to determine the optimal location for a new factory.
"Traditionally, geographers have considered factors such as proximity to raw materials, labor, energy supply, and the markets to determine the least-cost location for a factory. Now, the emphasis is changing towards institutional factors, and the social costs of industrial location." Using appropriate examples, describe what is meant by institutional factors and explain how social cost can be included in the least-cost equation to determine the optimal location for a new factory. Industrial location is product of a complex and dynamic combination of many factors. An entrepreneur has to consider a number of variables before making his final decision-making processes. Generally speaking, the ultimate aim of the entrepreneur is to maximize their profits or minimize their costs, though behavioral factors are sometimes taken into account. In recent years, institutional factors and social cost of industrial location become more and more important. Institutional factors also known as government policies or "Carrot and Stick" policy. Government many encourage or discourage the industrial growth in various areas for different purposes, in order to reduce regional disparities in economic growth, levels of employment and income, and so on. Government can achieve such purposes by introducing zoning laws or policy such as setting up Enterprise Zone. Besides, she can set up
Economics studies the choices that people, businesses and governments make given that they have scare resources. Why Do People INteract?
Economics studies the choices that people, businesses and governments make given that they have scare resources. ________________________________________________ WHY DO PEOPLE INTERACT? Marginal Rate of Transformation Opportunity Cost COMPARATIVE ADVANTAGE ABSOLUTE ADVANTAGE THE THEORY OF COMPARATIVE ADVANTAGE: Argues that specialization (in the good in which an individual or country has a comparative advantage) and trade will benefit all trading parties, even those that may be absolutely more efficient producers. AND THIS IS WHY PEOPLE TRADE OR INTERACT THE ROLE OF MONEY _______________________________________________________ THE STRUCTURE OF THE ECONOMY SUPPLY AND DEMAND The price of an item is the opportunity cost of that item. DEMAND SUPPLY A Change in Demand Change in the entire relationship between the quantity demanded and the price of a good. Factors that lead to a change in demand . Price of other goods a. Substitutes b. Compliments 2. Income and wealth a. Normal goods b. Inferior goods 3. Tastes and preferences 4. Expectations about future a. Future price increase b. Future increase in income 5. Number of households (or population) A Change in the Quantity Demanded vs. a Change in Demand A Change in Supply Change in the entire relationship between the quantity supplied and the price of a good. Factors that lead to a change in
Microeconomic Concepts - Effects of Privatization of the London Underground.
Business Economics - Microeconomic Concepts Effects of Privatization of the London Underground This essay aims to identify the business objectives of The London Underground, a public sector transport group that provides transportation services to the public within London, the potential changes to the business objectives if it were to be privatized. The London Underground, otherwise know as the Tube, is a public sector organization that is a publicly-owned part of the British mixed economy. The Tube is owned and controlled by the government and is a monopoly which takes advantage of economies of scale by being the sole provider of underground rail services to the public. This is supported by London Underground's stated mission; "...to open London's rich potential to all by delivering a dynamic public service that puts customers first." (http://tube.tfl.gov.uk) Being a public sector company the London Underground is subsidized by the government, which is funded by taxation. The organization is not accountable to shareholders or investors but to the government and public and therefore, in theory, should place the customers first as stated in the above mission statement. As a public sector company the London Underground and its customers enjoy many benefits such as government subsidies on ticket prices, government investment, service guarantees and public accountability. Set
Assess the costs and benefits of an extension of the tube line to Croydon
"Tube set to come to Croydon" Assess the costs and benefits of an extension of the tube line to Croydon Private costs can be defined as "costs internal to an exchange, which are paid by an individual economic unit (i.e. producers and consumers). Examples include the price paid by the consumer and the costs facing the producer". In extending the tube line to Croydon, it is evident that there would be a huge cost to the government (e.g. capital, maintenance and operation costs). Furthermore, the cost of the research and development required to successfully engineer such a tube system in Croydon would also incur a hefty cost for the government. Private benefits can be defined as "benefits internal to an exchange, which are received by an individual economic unit (i.e. producers and consumers). Examples include the gain felt by the consumer by consuming the good/service and the revenue/profit of the producer". The introduction of a tube line to Croydon would certainly benefit the government in that the sales of tickets and renting of space for shops in stations would generate huge levels of revenue, which could become profit over time. Another way in which this scheme could benefit the government is through the increased scope for advertising an extension in the tube system would create, meaning even more revenue would be generated for the government. External costs (or
