University Economics Assignment: Market and Multinational Analysis

This economics assignment analyzes two key areas: market structures and multinational corporations (MNCs). The first part focuses on a market sharing cartel, examining how firms determine output and cost structures, including marginal and average total costs. The analysis explores the impact of cartels in achieving monopoly-like outcomes. The second part delves into the characteristics, advantages, and disadvantages of multinational corporations. It discusses the role of MNCs in the global economy, their impact on host countries, and the differences between MNCs from advanced and emerging economies. The assignment also explores the advantages such as cheap labor and tax benefits, and disadvantages such as threats to local businesses and job displacement associated with MNCs. The analysis is supported by relevant academic references.

Question 11
Part a
Here Marginal cost given is given as 0.2q
Given q = 120-10P
Therefore marginal cost will be equal to 0.2(120-10P)
=24-2q
The average total cost is given as 10q
Where putting the value of q the average total cost becomes 10(120-10p)
12-p

Part b
Market sharing cartel can reach a situation of monopoly in the real world. The above
diagram shows what happens when the market sharing cartel reaches the situation of
monopoly. In the market sharing cartel when the member firms agrees on how to share the
market , each of the firm will be operating only on those areas which are agreed without
encroaching on the other territories (Young and Ghoshal 2016). Both the firms will be then
selling at the monopolist output.
However in the real world there may be presence of two or more firms which may be
having different types of cost curves. He firm with the greater capacity will be operating in
an inferior territory.

Question B
A multinational corporation is a kind of corporate organization which will be owning
or controlling production of the services or goods in at least one or more countries other than
the home country. One of the main characteristics of the multinational corporation are their
large sizes and the other characteristics is that the worldwide activities will be controlled by
the parent companies. MNCs usually help in importing and exporting all the goods and
services.it also makes investments in the foreign countries along with buying and selling
licenses in the foreign markets (Houba, Motchenkova and Wen 2015). The multinational
corporations also open manufacturing facilities or the assembly operations in the foreign
countries. However the multinational corporation from the emerging economies are a new
phenomenon in the market. The emerging market multinationals have become quite
important in every industry. However, multinational companies have huge impact on the host
countries. Firm in the developing countries tend to increase their expertise by working on it.
There is a presence of several advantages of multinational companies when present in the
advanced countries.
The management practices of the multinational corporation in the advanced countries
are much better than the multinational corporations from the emerging market economies.
The reason behind this is that;
Emerging market economies in the developing countries usually lacks in research and
development areas. The expenditure on research and development is also significant for the
promotion of technology(Fonseca and Normann 2014). Multinational corporations therefore
have high capability or research and development. The advanced countries will also be

having high economic growth, increased profits, development of new products with reduced
labour costs. The product opportunities of the multinational companies are far greater when
compared with the national companies. The multinational corporations emerging from the
advanced economies enjoy high market reputation and faces less difficulties in selling their
products by adopting effective advertising and sales promotion techniques. The multinational
corporations can also participate in the development programs of the underdeveloped
countries.
One of the main difference between the national corporation and the multinational
corporation is that national companies work in nation wide while the multinational companies
works world wide that is it is also present on the foreign countries multinational corporations
usually operates in two or more countries on the other hand the national corporations usually
restrict their operations to a single country (Buckley and Casson 2016).. The multinational
corporations usually learn to handle any kind of special challenges of multinational financial
management. Some of the differences between the national corporation and the multinational
corporations are that scope of expand for the multinational corporations are much higher than
the national corporation. However domestic companies always pertains only to a limited
territory. Multinational corporations always benefits other nations and firms on the other
hand the domestic firms have lesser benefits. Most of the multinational corporations gains by
earning the foreign exchange and by efficiently using the domestic resources. However, the
domestic company does not have much involvement of foreign currency. The domestic firms
can also help in creating employment opportunities. One of the biggest advantage of the firms
which carry business globally. Profits in case of national firms are also much low when
compared with the multinational corporations (Fonseca and Normann 2014). A good
management practice will always help in improving the performance of the firm. Therefore, it

can be said that the management practices always results in improving the performance of the
firms.
There is a presence of strong connection between management practices and the
performance of the firm. The activities of the multinational corporation companies are at the
heart of the global economy. This kind of global economy have emerged as companies all
over the world with the help of joining forces (Houba, Motchenkova and Wen 2015).
However there are certain advantages of the multinational corporations which are as follows;
Multinational companies have the ability for sourcing the labour cheaply and also
have the ability to operate in different companies in order to capitalize cheap labour markets.
This will maximize profit margins and will also deliver goods to the markets at a cheap cost.
Therefore cheap labour is one the advantage of the multinational corporations. They also
enjoy lower amount of tax in other countries for exports and imports which is an advantage
which the owners of the multinational corporations can take at any given point of time. When
the multinational countries sets up jobs in other countries (Buckley and Casson 2016). There
are also some disadvantages of multinational corporations which include threat to local
business or the national firms. There also results loss of jobs in other countries. With more
companies transferring offices and operating in other countries jobs for the people living in
developed countries are threatened. Multinational Corporation have both advantages and
disadvantages multinational corporations also have a broad market base in several countries.

Reference list
Buckley, P.J. and Casson, M., 2016. The future of the multinational enterprise. Springer.
Fonseca, M.A. and Normann, H.T., 2014. Endogenous cartel formation: Experimental
evidence. Economics Letters, 125(2), pp.223-225.
Houba, H., Motchenkova, E. and Wen, Q., 2015. The effects of leniency on cartel pricing.
The BE Journal of Theoretical Economics, 15(2), pp.351-389.
Young, C. and Ghoshal, S., 2016. Organization theory and the multinational corporation.
Springer.