4. Economies of scale are one of the most powerful forces in economics. Answer t

Question

4. Economies of scale are one of the most powerful forces in economics. Answer the following questions related to this very important principle of economics:

a. Explain how economies of scale are particularly important to a monopolist, be they real (in reality, there are very few examples of monopoly in the real economy) or hypothetical.

b. Building on question (a.) above, in the event that a new competitor decided to enter this otherwise monopolistic market and building on their natural competitive advantage of economies of scale, what would the embedded monopolist do to thwart the new competition?

c. Are there any economic lessons that a non-monopoly firm can learn from the hypothetical monopolist in the development of its own strategy for building a competitive advantage in the real world in which it operates? Explain.

5. One aspect of a monopolist is the immense amount of pricing power that they have in the marketplace. Answer the following questions regarding the pricing power of a hypothetical monopolist:

a. At which point along the demand curve would a monopolist theoretically stop raising prices? Explain.

b. Compare and contrast the monopolist to the perfect competitor. Why is the perfect competitor a price-taker and the monopolist a price-maker? Explain.

c. Explain the role that government regulation plays in controlling the otherwise monopolistic tendencies of a real-world market for which there is largely only one supplier of a product or service.

6. The following article depicts a rather negative view of the cell phone (wireless) telecommunications oligopoly: http://www.newyorker.com/tech/elements/the-oligopoly-problem . After reading the article, address the following questions:

a. After examining the article, are you convinced that the cell phone suppliers indeed have excessive levels of pricing power in the marketplace? Explain.

b. Does the inference of a “cell phone monopoly” ring true given the limited pricing power of the cell phone providers? Explain.

c. Explain the notion of “parallel pricing” that the authors believe is inherent to the cell phone industry. Are the authors of this article correct in their perception of the situation, at least in your opinion? d. Explain the notion of “parallel exclusion” that the authors believe is inherent to the cell phone industry. Are the authors of this article correct in their perception of the situation, at least in your opinion? What tends to drive the whole notion of limited number of suppliers – i.e. the oligopoly? Explain

Explanation / Answer

4. a. Economies of scale are particularly important to the Monopolist as the main and the important reason behind that is engaging of the foreign trade, and also for the generating of the productivity gains.

b. The monopolist threat to that product define by the substitute product or the complementary product so that it cannot be harm to them and also the important thing is there is less chance of new competititor to survive in the market.

c. Yes, there are the reason that non-monopoly can learn as

1. A single firm that a monopoly has

2. No competitor which is the main advantage of it.

3. Large Number of buyers and sellers

4. No close substitute product is there.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.