ECO- 8-1

docx

School

Southern New Hampshire University *

*We aren’t endorsed by this school

Course

201

Subject

Economics

Date

Jan 9, 2024

Type

docx

Pages

Uploaded by AmbassadorZebra3415

To: My Business Partner From: Kaneshia Wesley 10/16/23 RE: Microeconomics Simulations Hey Catlin! I know you have a vague idea of economics and how it would affect our business. I have a few points that I would like to share with you, and I think you will enjoy it. I have found a series of simulation games that show us how to navigate economic principles in an interactive way. I have taken a shot at them so I know you will be able to catch on to the key principles each game reveals. Comparative Advantage Comparative advantage was the first simulation game we played. In owning a business, it is important to know about opportunity cost and comparative advantage. Opportunity cost is the cost of an item given up on getting one. Comparative advantage is how well the business owner could produce a good at a lower cost. After knowing these factors, we should put into practice both opportunity cost as well as comparative advantage. Our business sales compared to other

businesses to observe if we could do business together. Doing this would reduce the costs in both businesses. While operating under opportunity cost, I would evaluate and determine what items I would and should give up for the sake of trade and good business. My experience with the simulation game allowed me to evaluate the necessary comparative advantage of how much of one item. I could produce in a specified amount of time. It affects a firm’s decision to trade. Another point I learned from the game was how individuals analyze opportunity costs to make business decisions. The production possibility frontier (PPF) model exhibited the efficiency of a trade. Taking part in a trade would cause a shift in the PPF. Which allowed the business owner to observe the conservation of resources from producing one item to another. Competitive Markets and Externalities

The competitive markets and externalities game showed the stance on policy intervention of the supply and demand equilibrium for certain products. I saw how taxes on a specific product were implemented. The taxes that were produced created an upward shift in the supply curve. With this change, the equilibrium price rose, and the quantity traded decreased. There were some

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

points when my sale price had reached the equilibrium price. Price elasticity measures the responsiveness of the quantity demanded of a good has any changes to its price. Subsidies were introduced in the simulation, adjusting to a downward shift in the supply curve which brought the equilibrium price down. This unveiled how government policy affects the market and the allotment of resources. Production, Entry, and Exit The production, entry, and exit simulation had us perform as drivers for a courier service. There are many factors to consider when staying in or exiting the market. The business would be in a competitive market due to others offering the same services. I would suggest that we stay competitive with the prices and keep customers in mind to obtain a profit. The simulation showed that our prices would be determined by the number of competitors within the market. With the customers wanting low-cost. We offer that in hopes of establishing a relationship. Firms are likely to enter a market with high demand which is seen as potential profit. In the game, the price was determined by how many drivers there were that day. So being attentive to the overall cost I would focus on the cost of time and labor. This aids in the cost structure. I would do this to see how much we would profit from doing the job. The simulation showed that the more competition there was less revenue I made as a driver. My job in the game was determining if I

would make a profit driving that day or not. Entry to the market or not. There were times within the game where I would be better off not driving to avoid loss. Entrepreneurs could apply the concept of marginal cost to their businesses to see if the variables outweigh their profits. Which would determine if I would leave the market or not. The marginal cost would be driving and picking up one more order. Running a business requires looking at the possible losses as well as the profits. I would look at my gas and labor, that is, my fixed cost, to determine if I could maximize my profits. The destination would also be a deciding factor due to the distance, raising the marginal cost and this would not benefit my business. The quiz showed me that total cost = fixed cost + variable cost. If the output cannot cover the production cost, making this a short run, it is suggested that the firm shuts down. The firm could potentially recover the fixed cost to continue to operate. The short-run is calculated by P=AVC. Market Structures The types of inefficiencies that derive from a monopoly are that there tend to be some common comments over the opinions of monopolies. One of the main complaints is that they charge too much and that is due to how they dictate the market. This allows businesses to set their own prices and consumers have no other options. Whereas some companies set their prices high to see higher profits. There is a way to determine its inefficiencies and that is by placing it

on a perfectly competitive model. The reason for this is monopolies do not have enough production to allocate effectively. This determines if a product is socially efficient. In perfect competition, the law of benefit maximization was set for each firm to generate the quantity of production. (P=MC) price equals demand and mc equates to how much it would be to generate more for production reasons. Another reason monopolistic competition has market inefficiencies is that firms cannot set prices and show a difference between their product and competitors. The reason for monopolistic inefficiency in competition could be the inefficiencies companies charge. Which is a price that is much more than the marginal cost at its highest performance. When companies can differentiate their products from competitors, they would earn higher profits outside of the competitive market. The monopolistic competitive firms maximize income when marginal/ revenue =marginal cost. Although the demand curve for this is a downward slope it is possible to change the price. Suppliers in these markets are price generators and will act similarly in the short run. A monopoly maximizes income by selling products at the point of MR =MC, profit maximization is calculated by using the location of the maximizing quantity on an average revenue curve. Monopolies and firms in a monopolistic market differ, due to monopolies being able to set higher prices. Firms in the monopolistic competitive market must compete with their prices to be profitable.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

An oligopoly is "a market in which only a few sellers each offering a product similar or identical to the products offered by other sellers in the market." (Mankiw, 2021). In my first round, I produced 4 barrels. And in the second I chose 5 barrels, and they produced 19 barrels. I looked forward to the companies trying to monopolize their prices. The nature of oligopolies they are more like competitive pricing. My profit fluctuated as I suspected due to the changing of my production amounts. If fewer firms in the market agree on pricing it would be more of a monopolistic price point although the Sherman Antitrust Act of 1980 made that conclusion illegal. Due to how people perceive prices oligopolies would struggle to maintain this type of pricing. Oligopoly prices lean more towards competitive pricing. Oligopolies are setters based on the competition. “The antitrust laws give the government various ways to promote competition.” (Mankiw, 2021). I had no strategy compared to my competitors. Due to them producing more items. They were able to earn more of a profit by selling more barrels. Had I produced the same quantity as my competitors I could have potentially decreased the market price and earned a similar profit. oligopolies drive prices to make marginal cost equal marginal revenue. Oligopolies is a market of few sellers. The differences between oligopolistic and monopolistic competitive markets are the ease of entry to the market and the number of firms. Monopolistic competition has many different firms and an easier entry. An example of this would be

hairdressing, they offer similar services that are slightly different. To oligopoly market has fewer firms and a higher entry cost to enter the market. Their technologies enable other producers to compete. These companies create what we understand as an oligopolistic market. Resources Mankiw, G. N. T., Mankiw, N., & Taylor, M. (2020, February 8). Economics .

Related Documents

ECON 3.05 TEMPLATE copy.docx

STM 9.png

all iclicker questions ECON 102.pdf

STM 1.png

Discussion Board 3.docx

Discussion Board 4.docx

Bus+441+-+Midterm+-+Fall+2023.docx

4-2 simulation Checkpoint.docx

MKT 414.12B Hwk 1.docx

econ4f03ass22022AG (1).docx

3E03_Final_20191__1_.pdf.pdf

Strong_reflection 3_class 4.docx

Recommended textbooks for you

ECON MICRO

Economics

ISBN:9781337000536

Author:William A. McEachern

Publisher:Cengage Learning

Economics Today and Tomorrow, Student Edition

Economics

ISBN:9780078747663

Author:McGraw-Hill

Publisher:Glencoe/McGraw-Hill School Pub Co

ECON MACRO

Economics

ISBN:9781337000529

Author:William A. McEachern

Publisher:Cengage Learning

Essentials of Economics (MindTap Course List)

Economics

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Microeconomics A Contemporary Intro

Economics

ISBN:9781285635101

Author:MCEACHERN

Publisher:Cengage

Managerial Economics: A Problem Solving Approach

Economics

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

ECON MICRO
Economics
ISBN:9781337000536
Author:William A. McEachern
Publisher:Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
ECON MACRO
Economics
ISBN:9781337000529
Author:William A. McEachern
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Microeconomics A Contemporary Intro
Economics
ISBN:9781285635101
Author:MCEACHERN
Publisher:Cengage
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning