Can someone please provide a feedback to this discussion post on a managerial ec
ID: 2441380 • Letter: C
Question
Can someone please provide a feedback to this discussion post on a managerial economic class. Thanks
Perfect Competition is a model of which examples are few and far between. Yet economists love to discuss this model. Explain why.
Perfect competition contains so many sellers offering the same product that an individual firm has virtually no control over the price of its product. The entry and exit level of this market is very easy as well. Economists love to discuss this model because market prices are already determined by the forces of supply and demand. It is extremely difficult to make money in a highly competitive market so the best way survive in perfect competition is to be as cost efficient as possible because there is absolutely no way to control the price. This teaches managers to be as economical as possible. The simplicity and understanding of perfect competition works is why economists love to discuss the model. Since things are generalized and assumed in this model, economists are able to test a variety of hypothesis to determine the best route for the market.
One of the criticisms of oligopolies is the adverse impacts these firms have on income distribution. Do you believe that is a valid critism? Discuss with appropriate examples.
Oligopoly is a market in which there is a small number of relatively large sellers. Pricing in this type of market is characterized by mutual interdependence among the sellers. Products may either be standardized or differentiated. Oligopoly can have adverse impacts on income distribution because each seller is setting its price while explicitly considering the reaction by its competitors to the price that it establishes. An example would be the free market shifting from the 1970s to the 1980s. Stagnant worker wages weren’t enough so borrowing had to be involved in order to accommodate living standards. Since there are a small number of sellers this would mean larger companies. These large companies would have multiple different levels of pay grades thus resulting in large income distributions.
Explanation / Answer
Answer 1:
The answer is correct. One point that can be added to make this answer wholesome is that Economists lopve this model because Perfect competition model is the base model on which other market models are based. Slight variation in the assumptions of the perfeclty competitive models leads to various other models of market structure. Thus, if base model is studied correclty, then other models can be easily understood.
Answer 2:
This answer is perfectly correct.