Please read the discussions below and provide a short reply asking questions, providing more detail or replying to the discussion with constructive feedback. 4 to 6 sentences each.
Discussion #1 Robinson 3: Pure Competition
In North Carolina (especially Asheville, which is a few hours away from Charlotte where I live), Craft Beers are huge. Asheville is known as one of the best craft beer cities in the state, if not the country.
Craft beer breweries are a great example of a pure competition industry because they meet all the characteristics of Perfect Competition.
– There are a large number of buyers and sellers: This is true as there are tons of craft breweries operating now. Not just in North Carolina, but in most major cities in America.
– The product sold by the firms in the industry is homogenous: This might not be 100% true, since some people will prefer one beer over another; but in my experience, most IPAs (India Pale Ales, my personal craft beer preference) taste pretty much the same.- Both buys and sellers have access to all the relevant information: Breweries often make manufacturing information available (including nutritional information, ingredients, etc). This can either be in an attempt to spread knowledge of their product or provide stellar customer-service.
– Any firm can enter or leave the industry without serious impediments: I’m not sure what it takes to open a brewery, but I know it’s not difficult to brew your own beer. I would say this is definitely true of the craft beer industry.
(Miller, pages 529-530)
“Productive efficiency occurs when the equilibrium output is supplied at minimum average cost” (Tutor2u.net). I cannot say for certain whether any breweries operate with this level of efficiency, but I would imagine they do because they are able to control the volume of beer they produce and the number of employees they staff. Since these are two of the bigger factors for efficiency (and since many breweries are privately owned and therefore the owners might be more money-conscious); I would guess they operate without much wasted overhead.
Allocative efficiency occurs when price is equal to marginal cost. Basically the marginal cost (the cost of making one more unit of beer) must be equal to the marginal benefit (how much you can sell an additional unit of beer for). This again seems to be a result of the owner/management’s ability to plan properly, but I would imagine that any brewery tries to have as little unsold product (waste) as possible.
Equity in the industry “corresponds to the issue of whether the distribution of goods and services to individuals and the profits to firms are fair” (Principles). Basically, the idea of equity questions whether the products are equally available to all consumers. Despite the fact that craft beer is more expensive than regular beer (ie Bud Light, MGD, etc) I would argue there is an even distribution of goods among the general public.
Miller, R. (2016). Economics today (18th Ed.). Upper Saddle River, New Jersey: Pearson Education.
Perfect Competition – Economic Efficiency | Economics. (n.d.). Retrieved February 02, 2016, from http://www.tutor2u.net/economics/reference/perfect-competition-economic-efficiency
Principles of Managerial Economics, v. 1.0. (n.d.). Retrieved February 02, 2016, from http://catalog.flatworldknowledge.com/bookhub/reader/5572?e=stengel_1.0-ch08_s02
Discussion #2: DIS # 3
An example of a Pure Competition Industry is fast food burger chains. This market has several competitors, for example, McDonalds, Burger king, Jack in the Box, In and out Burger, etc. All these chains can be considered close substitutes. Anyone can attempt to create a franchise and enter this market, there are no restrictions or significant barriers to enter this industry. The burger chains prices stay competitive with one another. The market is dictated by what the customers are willing to pay. People typically choose what chain to go to based on personal preference. The burger chains marketing campaigns are everywhere you look, TV, Radio, Internet, magazines, etc..
An example of a monopoly is PG&E (Pacific Gas and Electricity). Here in the San Francisco Bay Area, if you want gas or electricity in your house or business, you must buy it from PG&E, there are no close substitutes. There are no competitors for PG&E. The market is not dictated on what customers will pay. We don’t have a choice to purchase our electricity or gas anywhere else. PG&E is the sole owner of these resources. Also, no one could efficiently build a power plant or construct a power grid to compete with PG&E. The initial cost for PG&E was very high. However, since they have all of the customers, the price for this product remains reasonable.
Discussion #3: Shawnte Tyler
An example of pure competition is the Huggies industry. For those of you who don’t have children, it is a company that manufactures and sell baby diapers along with other baby products. This industry has over a hundred competitors in the United States alone. Some of its competitors include companies such as: Luvs, Pampers, Munchkin, Parents Choice/Walmart brand, and Comforts for Baby/Kroger Brand. There are 4 characteristics that allow this company to exist in Pure Competition. (1) There are so many other companies selling baby diapers in this market. No one buyer or seller has an influence on the price of baby diapers; and the quantity demanded by one buyer/seller is insignificant when compared to the market quantity. (2) Unless a parent has a personal preference, you can easily substitute one brand of baby diapers for the other. (3) There is equity across the board: meaning that these baby diaper industries all have access to information containing their competitor’s prices and are all able to obtain profitable opportunities with no barriers. (4) Any of these industries can enter or leave the market without serious obstacles. They don’t need to worry about reallocating resources like in a monopoly industry. They can move labor and capital around to whatever provides them with a good return on their investment.
Discussion #4: Taylor Marshall
The industry that I chose to discuss is the cell phone industry. This industry falls under monopolistic competition because there are two main dominant players (Verizon and AT&T) and two smaller competitors (Sprint and T-Mobile) and the entry into this industry is fairly easy. There are a number of barriers for any new competitors to enter the market including cell phone towers, creating a network, and signing deals with smartphone companies to sell their products. With Verizon and AT&T controlling over 70% of the cell phone industry, there is not a great deal of additional equity for new or existing entrants into the cell phone market. With two dominant players there are efficiencies of scale that both of them have over their competitors. The cell phone industry has many characteristics that proves it to be monopolistic including selling a plethora of cellular devices, having a high amount of advertisements, and high capital overhead stopping new competitors from entering the market. Even though it may seem there is a saturation in the cell phone market, wireless carrier revenues still grew by over 21% in 2014. This represents the wireless industry’s ability to continue to grow while maximizing their productive efficiency. Consumers are given a choice among the number of carriers. Every person who wants a cell phone plan can get it. Depending on what services consumers are willing to purchase will determine what price they will be willing to pay. This is an example of allocative efficiency.