Economics †Short Answers Essay

Answer #1 One of the problems that concern me right now would be the continuous increase of prices of petroleum products in the market which greatly affected my budget. Moreover, the said hike of oil prices causes our economy to perform badly for the past quarters which indirectly affects the prices of major commodities in the market like sugar, coffee, rice etc based from what I have read from the news papers and magazines. In this regard, oil price hike imposes negative externalities on our welfare –consumers. But to some extent, oil price hike also bring benefits to our economy in a form of forcing our federal government to find ways of providing alternative sources of energy aside from crude oil like bio-fuel. If it not for the price hikes of petroleum products in the market for the past decades, authorities would make no effort to find other sources of energy especially one that would serve as substitute for crude oil. After a few more decades, prices of petroleum products will start to decline as a consequence of emerging alternative sources of energy like bio-fuel as what I have said a while ago. Answer #2 One of the best examples of monopolists that currently exist in the market would be Microsoft Company. Microsoft Company serves to be the sole provider of Windows – software being used by almost all of personal computers around the globe. In this regard, the absence of other provider of Windows other than Microsoft makes the latter a monopolist catering for a large pool of buyers. Moreover, since Microsoft is the sole provider of Windows which we are all using nowadays, there is a great possibility for Microsoft to charge higher prices due to the absence of substitute goods for Windows. Furthermore, monopolists, because of its large market influence, can easily prevent new players to enter the industry of Software production giving them enough room to enjoy sole player in the market. Answer #3 Based from the negative effects that monopolists imposes not only to consumers but also to other market players, the federal government made necessary laws that would restrict the action of monopolists in the market creating enough way to protect the welfare of the consumers and other market players. One of the said laws could be the Anti-Trust Law. Anti-Trust Law is a bulk of laws that forbid unfair market competitions and anti-competitive behaviour of monopolists through illegalizing some practices of the latter that believed to hurt either or both businesses and consumers (U. S. Department of Justice, 1996). As for the case of labor monopolization of giant unions, I think we could also consider them as a source of potential negative effects just like of Microsoft as well as the misallocation of economic resources. The main reason here would be that, having a giant union monopolizing laborers in the market, there is a tendency that they will have a higher bargaining power on private firms of various industries, such as salary increase, which imposes negative effects on the operation of the businesses. At the end of the day, it is the consumers who will suffer from the actions of giant unions since the tendency of the private firms is to pass what ever the added costs they will incur from the said increase of bargaining power of labor unions. Answer #4  Another type of market structure aside from monopoly would be oligopoly. Oligopoly is a type of market structure wherein there is a few sellers and many buyers in market. As compared to monopoly, there exist market competition in oligopoly which improves the quality and quantity of goods and services in the market and so with the consumer welfare. One possible example of oligopoly would be Wal-Mart. Wal-Mart is a retail stores and tagged as â€Å"the Giant Store† which leads the industry of retailing due to its large size relative to other retail stores in the industry. The only down turn here in oligopoly would be the possibility of collusion between those â€Å"few sellers† in the market in order for them to minimize competition and have control on the price level in the market. The said collusion of oligopolists is called cartel and this act in the market just like a monopoly. This is the reason why federal government is keeping an eye on oligopolists to prevent such scenario since cartel is no difference with monopoly. Answer #5 Yes, the local phone service market, which was dominated before by Bell, has a great possibility of reaching competitive market due to the forces of competition. With the existence of competition, the local phone service industry members would have to compete to one another in order to attract more customers in terms such as higher service quality and lower price. Those improvements in the service quality and lower price of local phone service would make the said industry competitive since consumer welfare will surely improve; and at the end of the day, societal welfare will start to improve along side with the local phone service industry itself. Answer #6  One of the ways for us to determine if the product differentiation of competitive firms us wasted or not would be to know if the consumers possess brand loyalty which is the main target of differentiating product from one another. Product differentiation serves as the â€Å"identity† of any firm belonging to the competitive market and that identity will stand as the â€Å"brand† for the private firm. Now, if consumers in the market do not have the sense of â€Å"brand loyalty†, then, there is a big possibility that the product differentiation of private firms will be deemed unsuccessful in penetrating its target consumers. Answer #7  OPEC has been successful in controlling the production of oil since it has a bargaining power superimpose on the government of various countries that supplies oil in the market. OPEC determines the market demand and supply existing in the world market and either they increase or decrease the oil supply depending on the season, economic stability of their member countries and volume of supply of oil-producing countries to the organization, moreover, there are times that OPEC regulated the supply of oil for precautionary reasons like during the times of war and during the times of potential shortage in the coming period. The only negative effect of OPEC’s intervention on our welfare, especially during the times when they cut the supply of oil in the world market, would be the high prices of petroleum products on our domestic market. Therefore, the reason why there is existing oil price hike in the market would be either OPEC cut the supply of oil in the world market which creates pressure for the prices of petroleum products to increase, or because of the economic and political instability of oil-producing countries which creates threats for oil supply shortage in the world market. At the end of the day, consumers will carry the burden of that economic and political instability of other country through the intermediation of OPEC in the world market for petroleum products. Answer #8 The reason behind the success of Wal-Mart for the past years lies on its market share and size which provide rooms for further lowering down the prices of their goods relative to their competitors. Because of the large market size and share of Wal-Mart, they have been able to have more bargaining power to their suppliers in a form of price discounts since once Wal-Mart buys products to their suppliers; millions of volumes of goods are at stake. This is the reason why suppliers would want to supply Wal-Mart due to large volume of order that they can get once they were able to close a deal with the management of the Giant. At the end of the day, those price discounts that Wal-Mart was able to receive from their suppliers will give them enough room to further set the prices of their products lower as compared to their competitors, thereby, attracting more customers which eventually lead to experiencing high company growth in terms of profitability and sales volume.