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Tax Benefits to Existing Firm | Assignment

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Added on  2020-04-01

Tax Benefits to Existing Firm | Assignment

   Added on 2020-04-01

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Running head: ECONOMICS ASSIGNMENTECONOMICS ASSIGNMENTName of Student:Name of University:Author Note:
Tax Benefits to Existing Firm | Assignment_1
1ECONOMICS ASSIGNMENTANSWER 1a)Barriers to entry refer to various obstacles new firms face from entering into market of anew business or industry. This might be due to existent of monopoly competition or higher startup cost.b) Common barriers to entry operating in market economy are:Government Regulation: When government regulates output of certain sector such asdefense, it is not possible for new firm to enter into production.Higher start up cost or fixed cost: Most common problem faced by new entrants is thehigher cost of starting up the production that stops them.Tax benefits to existing firm: Lower tax rate on existent firms creates differences in theproduction cost as the new firm happens to incur higher cost due to no tax benefit impliedon it.ANSWER 2Perfect Competition: It is a type of market that has enormous buyers and sellers operatingin the market. Number of firms is infinitely many. This makes the firms price taker and everyagent has complete information of the market price (Foster, 2014). The products sold in suchmarket are absolutely similar or homogenous and can act as perfect substitute of each other.
Tax Benefits to Existing Firm | Assignment_2
2ECONOMICS ASSIGNMENTConsumers as well as producers are rational in their choice and decision-making. There exists nobarrier to entry or ext the industry under such market.Monopoly Competition: Here only one seller is ruling the market supply amidst the existence oflarge number of buyers. One seller hence there is no difference in the features sells the products.Monopolists are the sole price taker. Barrier to entry is higher in monopoly markets.Monopolistic Competition: Number of sellers are few compared to only one monopolist in themonopoly market. Many sellers make the market supply with low market power but theirproducts are differentiated (Nikaido, 2015). The products are not perfect substitute of each othermaking the competition imperfect. Few barriers to entry and exit are present in the short run andover long run, they vanishes.Oligopolistic Competition: Handful number of seller dominates the market supply. They canform cartels or collusion and act as single price take and enjoying market power like amonopolist. Products sold can be homogenous or differentiated (Scitovsky, 2013). Barriers toentry or exit are high in such market mostly because of government regulation like licensing orpresence of economies of scale.
Tax Benefits to Existing Firm | Assignment_3

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