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Assignment #12 Market Structures 2 Monopolistic Competition.docx
- 1. Assignment #12 Market Structures 2: Monopolistic Competition and Oligopoly (10 Points) Define the following terms: Cartel: _____________________________________________________ __________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Collusion: _____________________________________________________ _______________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Mutually Interdependent Firms: _____________________________________________________ _____ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________
- 2. Oligopoly: _____________________________________________________ _______________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Predatory Pricing: _____________________________________________________ ________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Product Differentiation: _____________________________________________________ ____________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Mutual Interdependence: _____________________________________________________ __________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Short Answer Questions:
- 3. 1. Using complete sentences, write a brief paragraph explaining the differences between oligopolies in a contestable market and oligopolies a cartel market. _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 3. Why do firms in a competitive market earn zero profits in the long run? _____________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 4. _____________________________________________________ _________________________ 4. Why do firms in a competitive industry have a perfectly elastic (horizontal) demand curve? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 5. Explain why a perfectly competitive firm will still earn a positive accounting profit even though they earn zero economic profit? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 5. 6. What factors are necessary for a monopoly to exist? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 7. What is the key characteristic defining the monopolistic Competition market structure? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 8. In what way(s) is monopolistic competition like perfect competition? Give an example. _____________________________________________________ _________________________
- 7. Market for iPods 9. In what way(s) is monopolistic competition like a monopoly? Give an example. _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 5. Use the graph below to answer the following questions. a. How many iPods would a perfectly competitive market produce? ________________ b. What price would the perfectly competitive market charge? ________________
- 8. c. How much profit would the perfectly competitive market make? ________________ d. How many iPods would a monopolistic market produce? ________________ e. What price would a monopolistic market charge? ________________ f. How much profit will the monopolistic market make? ________________ Alzahrani 1 Motorola and Alcatel-Lucent Sustainability in the Operations Management is a vital for any company. In order to realize all the gains of the firm, the organization has to use a number of environmental sustainability in its operations (Chase). For instance, Motorola and Alcatel-Lucent have all been known for employing a number of these strategies in their respective companies. The measures in turn helped the firms realize their full potential and maximize on their efficiency as part of the operations effected. Quality management: Motorola cut their waste amounts by cutting down on the defects found in their products like their televisions. The training conducted by the organization so as to reduce the costs and saved was concentrated on the technical leaders (Brown et al.). Alcatel-Lucent on the other hand adopted the DMAIC methodology of the six sigma whereby it entails the stages represented in its title by their first letters. They include Define, Measure, Analyze, Improve and Control. The phases
- 9. were used to guide the course of action undertaken for every project (Brown, Bessant, and Lamming). Lean systems: Motorola’s employees were trained to the highest proficiency in the techniques required to maximize their output and reduce the costs whilst saving the little they can. Meanwhile Alcatel-Lucent had chosen leaders that will also help the other employees in making sure that the production is going according to plan to avoid wastage. Both companies applied different lean systems that would help their employees achieve optimum productivity(Brown, Bessant, and Lamming). Product design: Motorola uses their new product designs as a means of cutting down on wastage through making less defective products. The various members would help their teams to realize their potential by virtually being the managers of their respective projects. For instance, the designs of the various components of their phones would be done at the same time in order to ensure the teams agreed on the choice of components (Mehrjerdi). Alcatel-Lucent’s leaders on the other hand would be used to define all the projects and their individual goals before embarking on them. They also chart the course taken and then devise solutions to any issue that may arise over the course of fulfilling the set objectives. The product designs helped in the production of products that the market was ready for and that suited the different market needs with less time wasted in their production. With the companies working as a unit, it was simpler to have each of them realize the benefits of the new product design mechanisms. Process design: The other benefit was the training of new employees who could take over and maximize their productivity with less wastage and more profits. Motorola for instance saw a reduced number of products returned to the industries owing to defects. The reduction was vital in the reduction of the costs of production with almost all the materials ending up efficiently used. Alcatel-Lucent also was not left behind(Ranky, Kalaba, and Zheng). The processes of production in their industries were taken up by specialists to help guide the others on how to
- 10. best produce efficiently. The leaders of the various teams were in charge of identifying inefficiencies, troubleshooting them and finally coming up with workable solutions that would benefit the company. Despite the initial hitches in the end, both companies were able to realize their goals and improve the process of production. Works Cited Brown, Steve et al. Operations Management: Policy, Practice and Performance Improvement. Routledge, 2013. Google Scholar. Web. 7 Oct. 2014. Brown, Steve, John Robert Bessant, and Richard Lamming. Strategic Operations Management. Routledge, 2013. Google Scholar. Web. 7 Oct. 2014. Chase, Jacobs. Operations Management. Tata McGraw-Hill, 2012. Google Scholar. Web. 7 Oct. 2014. Mehrjerdi, Yahia Zare. “Six-Sigma: Methodology, Tools and Its Future.” Assembly Automation 31.1 (2011): 79–88. Print. Ranky, P. G., O. Kalaba, and Yijun Zheng. “Sustainable Lean Six-Sigma Green Engineering System Design Educational Challenges and Interactive Multimedia Solution s.” Sustainable Systems and Technology (ISSST), 2012 IEEE International Symposium on. IEEE, 2012. 1–6. Google Scholar. Web. 7 Oct. 2014.
- 11. Assignment #10 Market Structures 1: Perfect Competition and Monopoly (10 Points) Define the following terms: Barriers to Entry: _____________________________________________________ _________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Long-run Competitive Equilibrium: _____________________________________________________ ___ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________
- 12. Marginal Cost: _____________________________________________________ ___________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Marginal Revenue: _____________________________________________________ ________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Market Power: _____________________________________________________ ___________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Market Share:
- 14. ___________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Short Answer Questions: 1. What are the six defining characteristics of a perfectly competitive market? I. ______________________________ II. _____________________________ III. ____________________________ IV. ____________________________ V. ____________________________ VI. ____________________________
- 15. 2. Explain the shutdown decision? (When do firms decide not to produce?) _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 3. Why do firms in a competitive market earn zero profits in the long run? _____________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 16. _____________________________________________________ _________________________ _____________________________________________________ _________________________ 4. Why do firms in a competitive industry have a perfectly elastic (horizontal) demand curve? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 5. Explain why a perfectly competitive firm will still earn a positive accounting profit even
- 17. though they earn zero economic profit? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ 6. What factors are necessary for a monopoly to exist? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 18. _____________________________________________________ _________________________ P = MC Output Total Revenue Fixed Costs Vatiable Costs Total Costs Marginal
- 19. Coss Average Total Costs Profit 20 0 50 - - 1 15 2 75 3 5 4 2 5 13 6 47 7 112
- 20. 8 25 9 18 10 3 7. What gives the monopolist the ability to earn positive economic profits when the firm facing perfect competition can only earn zero economic profits in the long-run _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 21. Problems and Exercises: 1. Complete the table below and answer the corresponding questions. a. According to the table above, is this a perfectly competitive firm or a monopolist? ___________. b. What is the profit maximizing level of output? ___________________________ c. How much profit does this firm make at the profit maximizing level of output? _______
- 22. d. What is causing profit to decrease beyond the profit maximizing level of output? _____________________________________________________ ____________________ _____________________________________________________ ____________________ P Q P Q
- 23. Market Firm S D S = MC PM QM D = MR = P ATC QC $12 PM QM
- 24. P Q D S $12 QF P Q P = D = MR S = MC FirmMarket ATC 2. Use the graphs below to answer the following questions
- 25. a. Is the firm pictured above experiencing positive or negative profits? _______________ b. Draw and label the profit/loss rectangle on the graph of the firm. c. Explain the process of returning to zero economic profits works. _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 26. _____________________________________________________ _________________________ d. Illustrate the process you explained in part c on the graphs above 3. Use the graphs below to answer the following questions P = MR Output Total
- 27. Revenue Fixed Cost Variable Cost Total Cost Marginal Cost Average Total Cost Profit 50 0 150 - - 1 35
- 28. 2 30 3 105 4 150 305 5 365 6 280 a. Is the firm pictured above experiencing positive or negative profits? _______________ b. Draw and label the profit/loss rectangle on the graph of the firm. c. Explain the process of returning to zero economic profits works. _____________________________________________________ _________________________
- 29. _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ d. Illustrate the process you explained in part c on the graphs above 4. Complete the table below and answer the corresponding questions.
- 30. a. What is the profit maximizing level of production? _____________ b. What is the profit at the level of production in part a? _________________ c. Explain why this firm would choose to produce the level in part a rather than shutting down and not producing even though they will be losing money? _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________ _____________________________________________________ _________________________
- 31. D S = MC MR ATC $60 $40 $30 $25 10 20 22 P Q Market for iPods
- 32. 5. Use the graph below to answer the following questions. a. How many iPods would a perfectly competitive market produce? ________________ b. What price would the perfectly competitive market charge? ________________ c. How much profit would the perfectly competitive market make? ________________ d. How many iPods would a monopolistic market produce? ________________
- 33. e. What price would a monopolistic market charge? ________________ f. How much profit will the monopolistic market make? ________________ Price Output Total Revenue Marginal Revenue Total
- 34. Cost Marginal Cost Average Total Cost Profit 30 0 100 30 1 128 30 2 150 30 3 165 30 4 185 30 5 210 30 6 245
- 35. 30 7 290 30 8 350 Assignment #11: Perfect Competition and Monopoly – Part 2 Complete the table below and answer the corresponding questions. Q1. Does the table depict a firm facing perfect competition or a monopolistic firm? Explain. _____________________________________________________ ________________________________
- 36. _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Q2. According to the table, what are this firms fixed costs? _________________________________ Q3. What is the profit maximizing level of output? __________________ Q4. What is the maximum profits this firm can attain? ______________________ Q5. Why would this firm decide to produce instead of shut- down? _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ _____________________________________________________
- 37. ________________________________ Q6. What would happen in the long-run to get this firm back to the long-run equilibrium? (zero economic profit) _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Price Output Total Revenue
- 38. Marginal Revenue Total Cost Marginal Cost Average Total Cost Profit 75 0 100 70 1 128 65 2 150
- 39. 60 3 165 55 4 185 50 5 210 45 6 245 40 7 290 35 8 350 Complete the table below and answer the corresponding questions.
- 40. Q1. Does the table depict a firm facing perfect competition or a monopolistic firm? Explain. _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Q2. According to the table, what are this firms fixed costs? _________________________________ Q3. What is the profit maximizing level of output? __________________ Q4. What is the maximum profits this firm can attain? ______________________ Q5. Why would this firm decide to produce instead of shut- down? _____________________________________________________
- 41. ________________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ Q6. What did this business to decrease their losses? _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________ _____________________________________________________ ________________________________