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Production Issues


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Production Issues

  1. 1. Production Issues
  2. 2. Is Bigger Better? <ul><li>Capital-intensive production results in fewer, larger firms – oligopolies </li></ul><ul><li>Benefits of efficient production more likely to go to producer as higher profits than to consumer as lower prices </li></ul><ul><li>Firms can use profits to purchase competitors (mergers) </li></ul>
  3. 3. Third Party Costs <ul><li>Non-monetary costs e.g. pollution </li></ul><ul><li>Rarely paid by producer or passed directly to consumers </li></ul><ul><li>Passed on to public </li></ul><ul><li>Shortcoming of efficiency as a production objective </li></ul>
  4. 4. Regulation <ul><li>Markets cannot exist with regulations to govern: </li></ul><ul><ul><li>Contracts </li></ul></ul><ul><ul><li>Private property </li></ul></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><li>Production standards </li></ul></ul><ul><li>Regulation is matter of public policy and subject to public debate </li></ul>
  5. 5. Needs vs Demand <ul><li>People want an economy that responds to needs </li></ul><ul><li>Economies respond to demand </li></ul><ul><li>Difference between a need and a demand is the ability to pay the market price </li></ul><ul><li>Question of ‘for whom to produce’ </li></ul>