Cafes and coffee shops
Are diseconomies of scale possible in your industry? Explain. Give an example of a diseconomy of scale for a firm in your industry.
Draw a long run cost curve for firms in your industry and explain its shape.
Students should draw their own graph (NOT copy & paste) no need for numbers – this is a conceptual question
Explain how your industry compares against each of the important conditions that define a perfectly competitive market structure. Is your industry a perfectly competitive industry?
How does each firm in a perfectly competitive industry decide the price they will charge, and the quantity they will sell?
Is it possible for firms in a perfectly competitive industry to make an economic profit or an economic loss in the short run? Explain, using a diagram.
Is it possible for a firm in a perfectly competitive industry to make an economic profit or an economic loss in the long run? Explain, using a diagram.Discuss the efficiency of the grain industry.
What do the results you have discussed in the questions above suggest to you about these issues for the grain industry-:
How desirable the grain growing industry is for new firms to enter the industry, opening up new areas as grain growing farms
A firm spending significant sums to advertise their product (eg television advertising campaign; widespread national promotion
A firm spending a small amount to advertise their product (eg local newspaper advert; small scale promotion of their product)
Whether the firm would have the funds to be able to spend significant sums of money on research & development, in order to develop better (cheaper) production processes.
Whether a grain farm would have the funds to be able to spend significant money on research & development, in order to develop better (more desired) versions of the product for their customer.
Explain how your industry compares against each of the important conditions that define a monopoly market structure. Is your industry a monopoly industry?
How does each firm in a monopoly industry decide the price they will charge, and the quantity they will sell? Consider the cases of a private monopoly and a regulated monopoly.
Is it possible for a firm in a monopoly industry to make an economic profit or an economic loss in the short run? Explain, using a diagram. Consider the cases of a private monopoly and a regulated monopoly.
Is it possible for a firm in a monopoly industry to make an economic profit or an economic loss in the long run? Explain, using a diagram. Consider the cases of a private monopoly and a regulated monopoly.
How does the economic efficiency of the water supply industry compare to the economic efficiency of a perfectly competitive industry?
(please discuss in terms of productive efficiency, allocative efficiency and dynamic efficiency)
What do the results you have discussed in the questions above suggest to you about these issues for the water supply industry-:
Explain how your industry compares against each of the important conditions that define a monopolistic competition market structure. Which of the four industries included in the assignment is a monopolistic competition industry?
How does each firm in a monopolistic competition industry decide the price they will charge, and the quantity they will sell?
Is it possible for a firm in a monopolistic competition industry to make an economic profit or an economic loss in the short run? Explain, using a diagram.
Is it possible for a firm in a monopolistic competition industry to make an economic profit or an economic loss in the long run? Explain, using a diagram.
How does the economic efficiency of the caf? and coffee shop industry compare to the economic efficiency of a perfectly competitive industry?
(please discuss in terms of productive efficiency, allocative efficiency and dynamic efficiency)
What do the results you have discussed in the questions above suggest to you about these issues for the caf? and coffee shops industry-:
Explain how your industry compares against each of the important conditions that define an oligopoly market structure. Which of the four industries included in the assignment is an oligopoly industry?
13. In the case of perfect competitive market a firm can have profit or losses only in the short run. However, in the long run the profit and losses are eliminated because of the presence of innumerable firms producing products that are divisible and homogeneous. There are no barriers when it comes to the entry of the firms and all the consumers have the information about it. Therefore, all chances of long-run profit are washed away.
A regulated monopoly is one that is regulated by the government that helps to safeguard the interest of the consumers. For example, monopolies have the power of market to ascertain the prices in competitive market. The regulation is done through price capping, competition through yardstick and limiting the growth of monopoly power.
Private monopoly is one where the market power is utilized to derive the maximum gain from the consumers. It will cater to the requirement of the customer at a specified price. The production costs are kept lower and the mix of products are seen to cater to the customers’ needs. This means it can charge profits and maximize the revenue and gains.
18. It is generally believed that monopolist always earn profits .In the short-run, if the demand is not sufficient monopolist can make losses. At times of recession or depression or any kind of crises demand for goods decreases and monopolist has to suffer losses .But if the losses continued for a long time then the monopolist will shut down his present business in the long run .But in the short run he will continue in his present business so long as his price is greater than the average variable cost. When losses exceed total fixed costs and the monopolist will not be able to cover his variable cost fully, the monopolist would stop production in the short-run (Mankiw & Taylor, 2011).
19.It is generally believed that monopolist always earn profit and when it comes to the long run it is expected that the firm will have profit in the long run otherwise the production will be stopped. An individual form has a control over the market and hence, likes to capture the market. This ensures that the monopoly business is targeted for making profits in the long run otherwise it is difficult to carry on the business.
20.As reported, the Agricultural industry is one amongst the key markets for Australian Water Supply and hence the relevance of the economic efficiency is directly related to the Agricultural aspects. Sine Agriculture is significantly related to the Agricultural sector, the influence of Water availability has a direct implication on the prospects of Agriculture. Hence, the irreconcilable efforts cannot be derived from the two distinct industrial domains that satisfy the condition of sustaining dynamic efficiency (Colander, 2008). Since the Water Supply industry is heavily dependent on the irrigational aspects of Agriculture, any lack of lower demand would directly influence the growth of the Water Supply industry that depicts the stake of Productive and Allocative efficiency by increasing the prospects in other industries .
21.Water Supply Industry forms the backbone of Australian Infrastructure that spreads into the Agricultural and Industrial sectors. Hence, the prospects of continued profits and new venture are indispensable attributes as noticed through the state of economics in Australia. However, the lack of rain and seasonal disturbance opens up the need for more efficient and calculated areas that could be penetrated by new entrants. However, since the Water Supply Industry in Australia is significantly centralized, there could be lesser chance of instant success and growth, though the external drives such as Human Population and Climatic condition are expected to increase the range in Water supply Industry that rounds up at 28.0% of Profit.
22. A monopolistic competition market structure is the one where there are number of buyers and sellers, selling similar but not identical goods, so the firms here compete on other factors excluding price. In a monopolistic market the sellers have a little power to influence their price, which they do so according to demand. There is sometimes collusion to fix prices (Snowdon & Wane, 2005). The industry of cafes and coffee shops possess all the characteristics mentioned above. Big coffee houses like Starbucks is the most common example of monopolistic competition in this type of industry.
23. In the case of monopolistic competition there are large number of sellers and sell products that are differentiated. It has some features of monopoly and perfect competition. Each firm occupies a smaller chunk of the market and any action by one rival leads to an action by another. Therefore, no single firm is in a position to influence the market. The buyers are large and all firms are price takers and not price makers. This enables to have a price that is uniform in nature. Therefore, the price is decided as per the product and the market scenario.
24. When it comes to the short-run, a firm in monopolistic competition can maximize profit or minimize the losses by production of the quantity that is related to when marginal revenue is equal to the marginal cost. When the average cost is less than the market price then the firm in the short run earns an economic profit (Gartner, 2006). Moreover, if the average cost is higher than the market price then the firm will have losses.
25. In the long run, the industry will have an economic profit and other firms will enter the industry with a lure of profit and ultimately lessen the profits for other firm. When more firm will enter there will be a decline in the profit and hence normal profit will be enjoyed by the industry. On having innumerable firms, there will be a loss more specifically the inefficient ones and will eliminate them form the overall industry and hence, normal profit will be shared by others (Romer, 2008).
26. Only the long run of a perfect competition exhibit optimal levels of economic efficiency. In the short run the in perfect competition it is not a good market to spend on research and development. But in the long run they create an environment for the research and innovation to flourish. In the cafe and coffee industry, not too much of research and innovation is required, and hence in short run they will not be much economic efficient (Varian, 2009). But in the long run the cafe and coffee shop industry possess the same economic efficiencies as that of a perfect competition market.
27. caf? and coffee shops industry-:
It would be a challenge for a new firm to create a position in the existing market, but making good promotion of the cafe may help to attract new customers.
Promotion is the key which helps the cafes and coffee shops to create an image.
A little promotion will provide only short term benefits and not for a long term
Only the cafes and coffee shops which follow the economies of scale will be able to spend large sums on research.
Small scale coffee houses are not too fund efficient to develop more desired versions of the product. But the large brands can spend significant amounts on the same.
28. Oligopoly market is the market where there are few firms selling a product so that there is intense competition among them. They sell either differentiated or homogenous products. In this type of competition the firms are interdependent on each other. Under this type of competition they avoid price war and choose other factors such as product differentiation in order to create more market (Junankar, 2013). The oligopoly market exists only among the large scale cafes and coffee houses. The small cafes and coffee houses mostly resemble perfect competitive markets, since they are more driven by supply and demand forces (Varian, 2009).
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