Assignment:
a. List some of the products you typically purchase as a consumer.
b. Identify the market structure(s) for the products listed
c. Is advertising is associated with the identified market structure(s). If so, explain why advertising and/or product differentiation is important to this particular market structure.
Answers will depend on the market structure under consideration. See Hint below:
Questions to Consider in Determining Market Structure
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PURE COMPETITON
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MONOPOLISTIC
COMPETITION
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OLIGOPOLY
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PURE MONOPOLY
SINGLE PRICE
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How many firms?
Firm size relative to market?
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Type of product?
Are there substitutes?
How many?
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Do the firms have to take
into consideration the
behavior of other firms?
(Interdependent)
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How readily available is
information about the
product, behavior of other
firms and consumers?
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Are there barriers to entry
or exit?
If so, what are they and
how significant are they?
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1. Consider the market structure of the firm that employs you or a firm in your state.
a. Why is it important for a profit maximizing firm to consider market structure in determining the price and output of its product or service?
b. How do you determine the profit maximizing level of production in terms of price, marginal revenue and marginal cost for the firm you are considering?
c. Has the industry your workplace ever shifted market structures? Discuss. If you do not work at a private-sector firm, then you could discuss a workplace you are familiar with.
3. What is the characteristic of the monopoly market that allows a natural monopoly to potentially produce output at the lowest possible LRAC?In other words, how can a natural monopoly be efficient for society?
4. When would a seller use loss leader strategy and when would it not?
5. Why do the same farmers always complain of losing money but never seem to exit the industry?
6. Monday is typically the slowest day in the restaurant industry. So why do so many restaurants stay open on Monday?
7. What makes all the self-interested firms adopt the latest available technology for producing at the lowest opportunity cost possible over time?
8. What is implied about efficiency if the average cost of producing a good exceeds the price people are willing to pay for it?
9. How can an increase in net benefits to society be generated from the systematic destruction of firms leaving the market?
10. How can an increase in net benefits to society be generated from the systematic destruction of firms leaving the market?