I NEED THIS REWORDED IN YOUR OWN WORDS PLEASE I NEED BY 10PM EST TONIGHT!!! Any numbers remain the same just words need to be changed I will attach document also to make easier.
6. a. The production of auto tires would increase. An increase in production will translate to increased supply which will in turn result in lower prices for the consumers.
b. When the number of firms in the tire industry declines, there will be an increase in the prices due to decreased supply of tires and competition in the market which will give the remaining producers an incentive to increase their prices.
c. When the cost of producing the tires goes up, the increase in cost will be passed on to the consumer making the price of the tire go up.
d. There could potentially be a dip in the supply of auto tires as a result of producers hoarding stock. This could lead to prices remaining at the same level or increasing.
e. Firms may begin to increase the production of auto tires as opposed to large tires in order to increase their profits.
f. The cost of production of tires will lead to an increase in consumer prices
g. Lowers the cost of production and leads to an increase in supply.
8. There was a decrease in the supply of hides and leather goods and as a result, an increase in the price of hides and leather goods.
9. In my view these are two distinct demand situations. The second equilibrium takes place following a decrease in demand.
11. Price ceiling takes place when the government interferes in the market to protect lower income households from increases in prices by putting a ceiling on the highest price that a good can be sold. However, such interventions can render the free market ineffective. Q(demanded)-Q(supplied)= persistent shortage amount of grain in Kansas City. Price flooring occurs when the cost of a product becomes so low that it starts to take money away from the producers. Q(supplied) at $4.60 can only be sold to buyers willing to pay for it. Q(demanded). This results in a surplus by leaving out consumers that cannot afford that price.
4. What is the formula for measuring price elasticity of demand? What does it mean (in terms of relative price and quantity changes) if the price-elasticity coefficient is less than 1? Equal to 1? Greater than 1?
Price elasticity of demand is derived from dividing the percentage change in quantity demanded by the percentage change in price. This is mathematically expressed as
Ed = [(change in Q)/ (sum of Q’s/2)] divided by [(change in P)/ (sum of P’s/2)]
When the price elasticity coefficient is less than 1, it means that the price elasticity of demand does not respond much to changes in price.
A coefficient of 1 implies that the percentage change in price equals the percentage in the quantity demanded. For example, a price decrease by 15 percent will result in a 15 percent increase in quantity demanded. A coefficient greater than one implies that consumers are comparatively receptive to changes in price.
7. You are chairperson of a state tax commission responsible for establishing a program to raise new revenue through excise taxes. Why would elasticity of demand be important to you in determining the products on which the taxes should be levied?
Elasticity of demand is an important consideration when establishing a plan to raise revenue through excise taxes. This is because of the need to tax goods whose demand is price inelastic. This is because demand for such goods will not fall as a result of the price increases resulting from taxing them. These means that the decrease in the demand for the goods will be less and that revenue can be raised.
9. Because of a legal settlement over state health care claims, in 1999 the U.S. tobacco companies had to raise the average price of a pack of cigarettes from $1.95 to $2.45. The decline in cigarette sales was estimated at 8 percent. What does this imply for the elasticity of demand for cigarettes? Explain.
This implies that the price elasticity of demand for cigarettes was inelastic. The coefficient of price elasticity of demand will be less than one which implies that demand is inelastic. Although the price changed by 22.7, quantity demanded only changed by 8 percent.
10. The income elasticities of demand for movies, dental services, and clothing have been estimated to be 13.4, 11, and 1.5, respectively. Interpret these coefficients. What does it mean if an income-elasticity coefficient is negative?
Movies and clothing can be deemed as normal goods because income and quantity demanded change in the same direction. A coefficient of 13.4 indicates that a one percentage increase in income will increase the demand for movies by 13.4 percent, dental services by 11percent and clothing by 1.5 percent.
A negative income-elasticity coefficient means that the goods are inferior and their demand falls when income increases due to consumers shifting to luxurious substitutes.
Chapter 6: #4, 6, 7, 8
4. An implicit cost is an opportunity cost that a company does not report as a separate, distinct expense
An example of an implicit cost is when taking a time off the money that could have been made.
An explicit cost is a physical outlay of cash or financial expenditure that the firm reports on its financial statements.
An example of an explicit cost is rent, utilities money that is taken away from the company that affect cash flow.
Inputs of Labor
8. The difference from fixed costs and variable costs in the short run is that the fixed costs are doesn’t rely on the what the output is it relies on the size that doesn’t change in the short run.
1. Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit?
(a) a supermarket in your hometown;
(b) the steel industry;
(c) a Kansas wheat farm;
(d) the commercial bank in which you or your family has an account;
(e) the automobile industry. In each case, justify your classification.
Pure competition: This refers to perfect competition which is characterized by a lot of big firms selling homogenous product. As such there is no control over price and no entry barriers; It is also characterized by non price competition.
Pure monopoly: Pure monopoly is characterized by a single firm offering a unique product which does not have close substitutes. The firm enjoys much control over price. There are entry barriers and advertising is carried out for public relations purposes
Monopolistic competition: It is characterized by big number of producers that deal with differentiated products and thus are not perfect. The barriers to entry are low and there is reasonable control over pricing as decisions of one firm don’t affect the other. There is also advertising, and branding
Oligopoly: A type of competition characterized by small number of firms selling homogenous or differentiated products; The actions of each firm affect market conditions due to their size. This may lead to collusion between producers. There are entry barriers
(a) Hometown supermarket: oligopoly. There are only a handful of large supermarkets that control a big segment of retail. Resource requirements imposes an entry barrier; there is much non-price competition.
(b) Steel industry: oligopoly. Only a few players; their products are standardized to a huge extent and there are barriers of entry in the steel industry.
(c) Kansas wheat farm: pure competition. There are a large number of firms that produce wheat; the product is standardized leading to limited control over pricing.
(d) Commercial bank: monopolistic competition. There are a number of banks that offer similar services. The banks also have control on how they can differentiate their services from competitors. Control over pricing is only within a narrow range.
(e) Automobile industry: oligopoly. There are only a handful of big firms in the automobile industry. There are entry barriers due to massive capital required.
3. “Even if a firm is losing money, it may be better to stay in business in the short run.” Is this statement ever true? Under what condition(s)?
Yes, a firm may find it better to stay in business in the short run even if it is losing money. This is the case in conditions whereby the loss is less than its fixed costs. For instance, assuming that a firm’s fixed costs equals $1,000, then it must pay this amount even if it ceased production. Assuming that the firm incurs an average variable cost of $10 for every unit it produces and sells its products at $15 per unit. If this firm produces 100 units using the MR = MC rule, its total revenue equals $1,500, variable cost equals $1,000, and total cost equals $2,000. The loss of $500 is less than the fixed cost of $1000.
4. Why is the equality of marginal revenue and marginal cost essential for profit maximization in all market structures? Explain why price can be substituted for marginal revenue in the MR 5 MC rule when an industry is purely competitive.
If the contribution of last unit to costs exceeds revenue generated, continued production will reduce profits. On the other hand, profits must increase so long as the marginal unit contributes more to revenue than to costs.
6. Explain: “The short-run rule for operating or shutting down is P>AVC, operate; P<AVC, shut down. The long- run rule for continuing in business or exiting the industry is P≥ATC, continue; P<ATC, exit.” In the short run, a firm incurs fixed costs whether it operates or not. If a firm can cover its variable costs and a portion of its fixed costs, then it would incur less losses if it continued to operate rather than close its operations. In the long run, all costs are variable; As such a firm will be better off closing if it cannot meet its costs.
Chapter 8: # 2, 8, 9, 10
2. Economies of scale are barriers that limit the entry of an industry. Starting companies incur high costs to be in the business and to enjoy success. This calls for a high level of competition by business irrespective of its establishment. As a result, a monopolistic environment is present based on the number of companies within the market. High costs precede due to competition.
8. Pharmaceutical companies in the US disregard laws that undermine drug businesses. The companies oppose the laws on the basis that they can allow importation of drugs which can be impactful in the pricing of the drugs. Instances of importation could allow a company to buy the drugs from another country at a lower price and resell them. The company will be entitled to marketing margins which might still be lower than those in the US.
9. Over 80% of the world diamonds were controlled by De Beers. With 45% on their name, they bought a large per cent of diamonds from other miners. However, the discovery of new diamonds and the ability of the Russian government to trade in diamond at the world market. The two factors had a profound impact on the monopolistic nature of De Beers.
Laws require strict compliance.
10. Microsoft was once culpable of violating Section 2 of the Sherman Act. The ability to run the Internet Explorer on the windows at free costs and create the window related java software made the sun’s software incompatible. As a remedy to the case, the district courts made decisions that could limit two companies from business ventures.
Chapter 9: # 3, 5, 10, 11
3. Monopolistic competition is characterized by products or services that are differentiated to the extent that they cannot be perfect substitutes. The products in a monopolistic setting are sold by many producers. Some monopolistic businesses like the grocery stores are encouraged by location. Since most people live in an urban setting, many grocery stores will offer similar but differentiated services.
5. Oligopolies, on the other hand, are characterized by a few enterprises that have homogeneous products. The main difference with monopolistic competition is the presence of a few sellers. The few sellers are protected by the economies of scale which limit the entry of new firms. Samsung and HP operate in the oligopolistic electronic appliance industry while Exxon Gas Station is in the oligopolistic energy industry. The car manufacturing industry is also oligopolistic with some of the Ford and GMC being some of the major players.
10. Oligopolistic firms use the economies of scale in advertising to get more clients. The consumers are informed of new products and encouraged to purchase specific brands through advertising. The firms in an oligopolistic also combine technological advancements alongside advertising to limit entry.
11. Anheuser-Busch influenced the people to develop a preference for light and dry beer. Through advanced bottling technology, the company was able to produce and distribute more beer at a lower cost. Oligopolistic competition is aided by specialized technologies which give the existing firms an edge over potential entrants.
Chapter 13: # 1, 6, 7, 9
1.) The trade policies that exist between countries influence their trading volumes. The United States has good trade policies with Canada which absorbs 19% of its exports. That is a significant portion of export considering that the United States accounts for 8.5% of the global exports. Exports are influenced by the cost of production in the country.
6.) The United States is less competitive in exporting wine to France since France produced it at a lower cost. The French have a comparative advantage in wine production and therefore, sell wine to the United States.
7.) Governments promote exports by subsidies and use tariffs to restrict imports.
Some countries that have higher production costs try to protect their industries by using tariffs and subsidies. That is a strategy that protects the domestic industries but harms their innovativeness.
9.) Restricted competition makes the local industries inefficient in resource use and allocation. It is advisable to allow free trade zones which encourage resource optimization.