Learning Goal: I’m working on a economics question and need the explanation and answer to help me learn.

Consider the four broad types of market structures outlined in Chapter 5 of your textbook. Not all firms fit perfectly into one of the four types, but most come very close. For this assignment, you are asked to identify ONE actual firm (or the industry in which the firm exists) and THE market structure into which it roughly fits (not one firm for each market structure). You may select one from the for-profit sector, but are highly encouraged to select an organization from the NFP sector. Support your answer by including ALL of the following:

• Comment on the amount of competition this firm or organization faces (# of firms), and how that competition is a function of the ease firms face when entering the market (barriers to entry). If a barrier(s) to entry exists, what is it (are they)? Or, what explains the lack of a barrier to entry?
• Comment on whether the firm or organization produces a highly differentiated or homogeneous/standardized product (relative to other firms).
• Comment on whether the firm or organization has freedom with respect to price setting (price maker) or faces limitation with respect to setting price (price taker). If you believe the firm is a price taker, what characteristics of the firm, its product, etc. support this conclusion? If the firm is a price maker, provide an example of pricing or strategy that demonstrates this firm’s ability to set its own prices.
• NEW SINCE THE BEFORE PAPER: Make a recommendation to the firm or organization based on its market structure. For example, is there a good next move or strategy that seems to make sense for this firm because of its market power or lack thereof (a new product or service, marketing campaign, change in scale of operation, etc)?

ADDITIONAL CONSIDERATIONS FOR THE AFTER PAPER:

Your goal is to use knowledge from Chapters 1-6 + Special Topics to expand and improve your original paper. The following is a list (not exhaustive) of sample concepts from the aforementioned lectures:

“Thinking Like an Economist”

• What INCENTIVES does your firm have to produce in its market? Is there an OPPORTUNITY COST to producing or not producing in its market?
• How does the concept of SCARCITY explain the value of the firm’s product? How does SCARCITY explain the amount of competition your firm faces and the ability of your firm to be a price maker?
• How does the principle of VOLUNTARY EXCHANGE explain why your firm is willing to participate in its market?

“Understanding Consumer Behavior”

• Do shifts in the DEMAND CURVE for your firm’s product explain its ability to charge a high or low price? What are those shifts and the related demand-side determinants? Does your firm play any part in manipulating those determinants?
• Would you expect the MARGINAL UTILITY of your firm’s consumers to diminish as more of your firm’s product is consumed? How does that play a role in how your firm prices its product? Connect this to WILLINGNESS TO PAY and ELASTICITY, as we did in class.
• How might you categorize the PRICE ELASTICITY OF DEMAND for your firm’s product? Does the number of competitors in the market influence the number of available substitutes, ultimately affecting elasticity?
• Considering the factors influencing consumer responsiveness, does your firm’s product embody any of these characteristics? How do those characteristics impact the price ELASTICITY of your firm’s product? How does ELASTICITY determine the firm’s ability to be a PRICE MAKER?
• What methods does your firm use to DIFFERENTIATE its product? Do these methods affect the number of available substitutes for your firm’s product?
• Is your firm’s product a SUBSTITUTE or COMPLEMENT to another firm’s product? If so, does that affect how the firms interact or compete?
• How does the degree/extent of your firm’s price-making ability influence the size of CONSUMER SURPLUS in this market? Note: Calculations are not possible without a demand curve, so just comment on magnitude.

“Understanding Firm Decisions”

• Does your firm’s COST OF PRODUCTION, or the cost of producing the good in your firm’s market, play a role in creating barriers to entry?
• Does your firm’s PRODUCTIVITY play a role in its ability to lower its costs of production and compete with other firms?
• Do shifts in the SUPPLY CURVE for your firm’s product explain its ability to charge a high or low price? What are those shifts and the related supply-side determinants? Does your firm play any part in manipulating those determinants?

“Supply and Demand Analysis”

• How well does the SUPPLY AND DEMAND MODEL apply to your firm?
• While all firms are assumed to maximize profit, some firms can do so in more creative ways as a result of its market power. If your firm is a PRICE MAKER, does it engage in any UNIQUE PRICING SCHEMES (something other than selling all quantities for the price at which MR=MC)? Unique pricing schemes would be methods like price discrimination and bundling.
  • Be careful not to confuse “price taking” with low prices or regulation. If a firm is not charging marginal cost exactly, has any markup, or is able to charge a different price than competitors, it is still considered a price maker.
• How does the degree/extent of your firm’s price-making ability influence the size of PRODUCER SURPLUS in this market? Note: Calculations are not possible without a supply curve, so just comment on magnitude.

“Market Failure”

• Do you observe positive or negative EXTERNALITIES in this market?
• Is your firm involved in imposing or CORRECTING EXTERNALITIES?
• Does your firm produce a PUBLIC GOOD, or is your firm involved in producing a good that the for-profit sector is unwilling to produce?

“Strategic Interaction”

• Does your firm engage in STRATEGY when choosing its output or price levels? Why must it engage in strategy? How does the firm’s strategy relate to the basic strategic behaviors outlined in class?

Additional Possible NFP Applications

• Do MONOPOLIES exist in the non-profit sector, and if so, how do they come about? (for example, mergers)
• Does your firm engage in any SPECIAL PRICING TECHNIQUES (for example, price discrimination) that are based on income or other observable market characteristics?

Requirements: At least 2 Pages (double-spaced)