Topic: Cellphone Industry
Instructions: Identify a particular industry (non-government) that meets the criteria for Pure Competition or Monopoly. Explain clearly why you think the industry is in Pure Competition or is a Monopoly and evaluate it from perspectives of efficiency and equity. You may post to both categories, but are required to only select one. Keep in mind there are four market structures and we study Monopolistic Competition and Oligopoly next week. Read the Discussion Instructions for Week 4 and identify the market characteristics, productive efficiency, allocative efficiency, and equity in the particular industry that you selected.
Note: Do not duplicate an example in the text, lead post or a selection from one of your classmates or you will be asked to re-post.
1. Identify a specific industry that is perfectly competitive, also known as, pure competition (PC) or perfectly monopolistic, also known as pure monopoly (PM). By specific, I mean something other a board category, for example, there are many kinds of restaurants, fast food, luxury, casual dining, BBQ, etc. Restaurants is too board, but casual dining is more specific.
2. Describe what makes them PC or PM based on the characteristics in the book.
3. You may “claim” an industry before you are prepared to post about it by writing it in the subject line.
4. Write the industry in your subject line.
5. Find data that supports your claim, for example, market share or the number of firms in the industry. Most industries have trade associations. You can also search for “market share of fast food.”
6. Include your normative positions. In this case, those would be whether PC or MC industries are good for consumers, good for businesses, etc.
7. Discuss each of the model assumptions, a) number of firms, b) type of product/service homogenous or heterogeneous, c) entry and exist in the industry (also known as barriers to entrance), d) control over price, and e) non-price competition.
8. Cite your sources.
9. You need a minimum of three substantial interactions that add new information to the discussion. Please see the General Discussion area for more information.
Your initial post should identify a specific industry (non-government) that meets the criteria for pure (perfect) competition (PC) or pure monopoly (PM). This is not as easy as it sounds. Most of the businesses you can call out by name are not PC firms, and very few are true monopolies. In fact, most of you will never have visited a purely competitive firm. Read the assumptions or characteristics of these models carefully. This is difficult because the definitions are very strict.
I often explain this in terms of a thermometer. Absolute zero is -459.67 F below zero. That is as cold as it gets. There are a lot of temperatures you and I would think are cold, 30 degrees, -51 degrees, 6 degrees, etc., but there is only one absolute zero. I compare that to a monopoly. 450 degrees below zero is very cold and it is close to absolute zero, but it’s not. Anything above absolute zero and below 100 or 200 degrees would be like an oligopoly. Anything above that up to several thousand degrees would be monopolistic competition and anything above several thousand degrees is pure competition. In this assignment, you are only concerned with the two extremes, monopolies and pure competition.
Explain clearly why you think the industry is a purely competitive or monopolistic using each of the characteristics found in the book, number of firms, branding (or not), entry and exit, etc. Evaluate the industry from the perspectives of efficiency and equity. You may post both categories, but only one required is required.
Please do not duplicate an example in the text, or a selection from one of your classmates. All selections must be unique. Note: A post that merely recites an example without offering economic analysis or responding to the questions assigned, garners few points. I do not want a definition of growth. If you agree with someone’s post you must include a reference to the new information you are adding to their idea. If you ask a question, it must be insightful, not a restatement of what they said.
Note: A post that merely recites an example without offering economic analysis or responding to the questions assigned, garners few points.
Initial post is due Thursday night.
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