Principles of Economics : PDF
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Added on 2020-02-18
Principles of Economics : PDF
Added on 2020-02-18
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Running head: PRINCIPLES OF ECONOMICS Principles of EconomicsName of the StudentName of the UniversityAuthor Note
1PRINCIPLES OF ECONOMICS Table of ContentsAnswer 1:.........................................................................................................................................2Answer 2:.........................................................................................................................................2Answer 3:.........................................................................................................................................4Answer 4:.........................................................................................................................................6Answer 5:.........................................................................................................................................9Answer 6:.......................................................................................................................................11Answer 7:.......................................................................................................................................12Answer 8:.......................................................................................................................................13References......................................................................................................................................14
2PRINCIPLES OF ECONOMICS Answer 1: A monopoly is that market condition where there is only one seller and many buyers. Theseller, being the single supplier in the market, enjoys considerable market power and has thepower to take pricing decisions and decisions regarding the amount of supply of his product orservice. In this scenario, there are two monopolies in an economy, one in the supplier of waterand the other is the provider of landline connections. In spite of both the sellers beingmonopolists, the market power enjoyed by the sellers may be different, depending upon thenature of their products and the elasticity of demand for their products (Askar 2013). Water being one of the daily necessities for survival, the demand for water supply ishighly inelastic to changes in the price levels, as people will anyhow buy water, even if thatrequires curtailing on other costs. On the other hand, the demand for landline phone connections,though high, but is comparatively more elastic to changes in price levels. The reason behind thisis that the product is not an absolute necessity and there are substitutes available, unlike water.This implies that the monopolist who supplies water enjoys more market power than the one whoprovides landline phone connections (Erikson 2014). Answer 2: The fast food market, in an overall framework, though have many players, is dominatedby several big players like those of KFC, Hungry Jack and McDonald’s. Depending upon thegeographical locations and the tastes and preferences of the people, these players enjoy
3PRINCIPLES OF ECONOMICS dominance over one another. But, in an overall basis, the market for fast food market shows anoligopolistic structure. An oligopolistic market has few sellers and many buyers, with each of thebig sellers enjoying considerable market share (Sushko 2013). The situation can be shown withthe help of the following diagram: P MCP0Profit ACP1 Demand 0 Q0 Q MRFigure 1: Oligopoly Firm (Source: As created by the author) It can be seen from the above figure that the oligopolistic firm produce at the point wherethe marginal revenue of the firm is equal to the marginal cost of the firm. Here, the firm isproduces Q0 amount of output, which is less than that of the perfectly competitive level and sells
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