Economic Policy - General Equilibrium, Monopoly, And Oligopoly

Often firms in an oligopoly (secretly) liaise in order to set a joint price for a certain good so that they don't go below that and both maximise their profits.

A monopoly occurs when one firm dominates the market of a certain good or service, due to barriers to entry of other firms.

If Bob and Susie try to start up an airline, they will have to buy numerous costly inputs such as airplanes, staff and space in airports, etc. This will mean that they will have to charge incredibly high prices in comparison to Ryanair and Aerlingus, meaning that it will be very difficult for them to sell any seats.

The concentration ratio refers to the share of industry output in sales or employment that is accounted for by the top firms. In this case, the concentration ratio of 80% indicates that Anheuser-Busch and Miller-Coors together account for 80% of the industry's output in terms of sales or employment. This suggests that these two firms have a significant level of control and dominance in the US beer industry.

The Federal Trade Commission was established in 1914 in the US to investigate and regulate unfair methods of competition.

The free market, or Adam Smith's concept of an "invisible hand" ensures that scarce resources are allocated among firms efficiently, assuming that factor markets are competitive and open, that all firms pay the same prices for inputs, and that all firms maximise profits.

Price discrimination is when a seller sells a certain product for different prices to different customers.

Partial equilibrium analysis refers to the process of examining the equilibrium conditions in individual markets and for households and firms separately. It involves analyzing the supply and demand dynamics, price determination, and market outcomes in specific sectors or industries, without considering the interconnections and feedback effects from other markets or the overall economy. This approach allows for a more detailed and focused analysis of the factors influencing market equilibrium and helps in understanding the behavior and decision-making of individual economic agents.

Collusion occurs when price- and quantity-fixing agreements among producers are explicit. Tacit collusion means the agreements are implicit.

Horizontal differentiation refers to the variation in products or services that makes them more suitable or preferable for certain individuals or groups while being less desirable for others. It implies that different products have distinct features or characteristics that cater to different consumer preferences or needs. This can result in a situation where a particular product may be considered superior by some consumers but not by others, depending on their specific requirements or tastes.

The term "duopoly" refers to a market structure in which there are only two firms that dominate the industry. These two firms have a significant market share and often have a strong influence on pricing and competition within the market. Unlike a monopoly, where there is only one firm controlling the market, a duopoly allows for some level of competition between the two dominant firms. Therefore, the term "duopoly" accurately describes a two-firm oligopoly.

When the demand for housing in Dublin suddenly rises, it means that more people are willing and able to buy houses. This increase in demand will cause the demand curve for the housing market to shift to the right, not to the left. The leftward shift of the demand curve would indicate a decrease in demand, which is not consistent with the given scenario. Therefore, the answer "The demand curve for the housing market would shift to the left" is not true.

The Sherman Act 1980 was the first US Federal statute to limit cartels and monopolies.

The correct answer is Game theory. Game theory is the name given to John Nash's theory which analyzes choices made by rival firms to maximize well-being and anticipate reactions. This theory is widely used in economics and other fields to study strategic decision-making and interactions between individuals or organizations. It provides a framework for understanding how individuals or firms make decisions in situations where the outcome depends on the choices of others.

McDonald's belongs to the market structure of oligopoly. This is because the fast-food industry is dominated by a few major players, including McDonald's, Burger King, and Wendy's. These companies have a significant market share and have the ability to influence prices and competition. The fact that McDonald's is a well-known symbol of American capitalism and sells a large number of Big Macs every second further supports its position in an oligopolistic market structure.

Buying a meal on an airplane is an example of a monopoly because it refers to a situation where there is only one provider of a particular product or service. In this case, the airline has exclusive control over the food and beverage options available on the flight, giving passengers no alternative choices. This lack of competition allows the airline to set prices and control the market without any significant competition from other vendors.

If there is no way of improving the situation of one person, without making that of another person worse, the solution found is Pareto Efficient. Because Anne and Jim swapped and both of them benefitted from it without making the other worse off, Pareto Efficiency, or Pareto Optimality, is in effect here.

This scenario is an example of network externalities. Network externalities occur when the value of a product or service increases as more people use it. In this case, Jill's video phone becomes less valuable because none of her friends have video phones, limiting her ability to communicate with them. The value of a video phone is dependent on the network of other users, making it an example of network externalities.

Major technological advances would reduce the price of mobile phones significantly. Cheaper phones would mean more demand for them. The supply curve would shift to the right as producers would produce more at a lower cost. Demand for household phones would not increase as people would prefer cheap mobile phones.

Market failure occurs when resources are allocated inefficiently. Diminishing marginal utility is the law that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product, and is therefore not an example of market failure.

The correct answer is the five forces model. This model, developed by Michael Porter, is used to analyze the competitive environment of an industry. It considers five forces that shape the industry's profitability: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products or services, and the intensity of competitive rivalry. By assessing these forces, businesses can understand the attractiveness and profitability of an industry, and develop strategies to gain a competitive advantage.

Contestable markets refer to markets where there are low barriers to entry and exit, making it easy for new firms to enter and compete with existing firms. In these markets, the threat of potential entry keeps prices competitive as existing firms cannot raise prices without the risk of new entrants entering the market and undercutting them. This concept emphasizes the importance of potential competition in maintaining competitive prices, even if there are only a few actual competitors present in the market.

Monopolistic competition is a market structure with a large number of firms, no barriers to entry, and product differentiation. If the nightclubs in Dublin had this type of market structure there would be many different clubs for students to choose from, allowing them to maximise their utility satisfaction.