Assignment:
Please reword these paragraphs in your own words. DO NOT copy from any websites or use the same words as in the paragraphs below.
1-It states that as managers try to keep costs low, it may not always be the business expenses that are on their mind, but the part of them that go into their pockets. A manager of a company will try to maximize profits in homes it can help him on his way to maximizing his income as well. I have seen with my own eyes, companies that do not want to pay people what they are worth, including their managers. I worked at a factory for about 3 years that had an insanely high rate of turn over. In the end, it ended up costing the company more to have the people trained for a week or two and then have them leave than it would of just to raise the pay a little bit. People would think the pay was okay until they got into work and started training and seeing how hard the job was and how much was expected out of the employees for just about a dollar over minimum wage. If you didn't produce enough parts for the day they would then drop your pay by $0.50 an hour. It has been two and a half years since I have worked there and everyone that I worked with has also moved on to different jobs. The company is barely staying afloat because of not being able to keep employees there.
2-According to Colander (2013) "Monopoly is a market structure in which one firm makes up the entire market." Meaning that there is no competition so a firm has the flexibility to charge whatever price they want and produce inferior products. As for monopolistic and perfect competition, is the opposite? Meaning that there is a lot of competition, so firms are limited to how much they can price their goods or services. Now, the more difficult part is describing the difference from monopolistic competition to perfect competition. According to the reading material, the main difference is that in monopolistic competition there is the consideration of limiting the amount of production due to lowering the market price of their product. Besides thinking of rarity, a good example would refrigerators. Usually everyone needs a refrigerator; however there really is no point of having more than one or two refrigerator per household. If I produce so many, I would have no one to sell the product to. As for perfect competition assumes that every sale equals a profit.
3-Oligopolistic have a strategy plan on how much they will price their products or services according to their competitors. The Cartel Model is a number of firms acting as one. They as a team dominate the industry and limit outside entry. Each of the firms involved within the firms follow a uniform pricing policy that is beneficial for everyone. Implicit price collision is when everyone charges the same price. For example when there are vendors outside selling the same merchandise, the prices will usually be the same to avoid competition. According to the reading Economics, Ch. 15: Oligopoly and Antitrust Policies, The contestable market model is a model of oligopoly in which barriers to entry and barriers to exit, not the structure of the market, determine a firms price and output decisions. (Phoenix 2013)
4-formal economic reasoning involves working together instead of against each other to benefit each party. Game theory however is consider more like strategic thinking where the organization predicts the actions of another organization or party. Now formal economic reasoning is a little bit more difficult to identify in the real-word since companies are competitive with each other. But I do see this a lot with certain merchants working more in the free market, unlike the more regulated markets provided by more established countries. Like in Korea if I go to the electronic markets on the streets, I can bargain with the merchants for a better deal. However what a lot of people don't know, is that the merchants know each other and work together. So if I been working hard for a bargain, and I tell the merchant I will just go somewhere else for a cheaper price, he will just tell his buddies and they will either charge the same price or even more. Game theory can also be applied to this situation, because the merchants are predicting my actions. They know if I can't find the deal I want, I will just go to another merchant. That merchant in-hand demands a higher price so that he can either profit from my mistake, I return to the previous merchant, or there is the chance they lose a customer.
5-What I got from the video is that in order to have the perfect competition, the competitors have to have the same product or service. There should also be no barriers that will block others from making the same product or providing the same service. They must also be no advantage for existing firms and lastly, the buyer and sellers must have good price information. Their example of airlines was a really good choice because there are so many airlines out there and they all provide the same service. They all have competing prices and provide the exact same service. Another example of perfect example would be production studios. They all provide the same service of making and distributing movies. Anyone can open up a studio and do business like paramount studios whether it's a big company or not.
Questions to be answered for my teacher
1-According to Colander (2013), all firms, regardless of structure produces where marginal revenue = marginal cost (MR=MC)? However, for the monopoly, Colander states, "the marginal revenue curve is below the demand curve, which means that MR = MC will not intersect the demand curve in the same way as it does in perfect competition". Why is the MR curve below the demand curve in monopoly? What impact does this have on the price the monopoly charges? What about in perfect competition?
2-How do firms use MR and MC to determine the profit maximizing point of production? Explain
3-cable companies are local monopolies because they are granted exclusivity over certain markets. The government grants this exclusivity, which begs the question of whether the government should interfere ini the market or not and why. Further, does the cable company have any close substitute competitors? If so, how does this impact their pricing structure?