Posted at 10.31.2018
Q#1 (6 details) How will the business maximize its revenue (or minimize loss) its first year, while it is a monopoly firm? Give concrete instances by referring to the cottages, restaurant and ferry. What advantages does it have in its first time and how can it maximize revenue? What are the risks associated with this strategy? (400-600 words)
In the first 12 months the firm would be a monopoly firm as there is no existing firm on the market working with the destination on Partridge Island. It offers hire services for cottages, restaurants and ferry. Being truly a monopoly firm it includes two choices available first one is to decide how much amount is usually to be sold and the other the first is the decision about the price to be incurred. A significant thing is that a monopolist can either determine variety to be sold or the price to be priced, but not both price and amount together. If this firm take a decision about price then your variety sold will be made the decision by the market. If given company decides about the number to be sold then your price will be made the decision the market makes. To be able to maximize income or minimize deficits the organization will produce at a level at which its marginal costs are equal to its marginal revenues. Level of productivity is determined by the intersection of the two curves. To adopt decision about the prices and quantities monopolist must use the info on market demand and prices, and can complement this data with the expenses encountered by monopolist. This firm will charge a cost which is significantly higher than the marginal economical costs as there is absolutely no danger of getting rid of customers. The company is price manufacturer in this case and has a full control over prices to be a single company of cottages, restaurants and ferry on Partridge Island.
There is no perfect substitute available in the market therefore the firm will attempt a charge a maximum possible price. In order to maximize the total profits the organization must carefully analyse the demand framework for cottages, restaurants and ferry, independently. Maximum lease will be recharged for a service that has most in elastic demand. In flexible demand means that consumer is going to avail the assistance of this firm even at high prices. On the other hand comparatively low rent will be costed for something having more elastic demand. In this manner one of the three departments of cottages, restaurants and ferry, the lease will be dependant on the organization keeping in view the motive of profit maximization. So far as the willpower of rent is considered costs play very important role. It is possible to decrease the hire in the team which is having beneficial cost structure when compared with the other departments of the company. It is often observed that a monopoly firm usually earns excessive profits both over time and short run but is also easy for a monopolist organization to experience loss. In case of losses firm will attempt to minimize the costs being faced in so doing the difference between income and costs will be lowered and therefore the loss.
Q# 2 (6 things) The following year, a new business enters the marketplace and cottages, restaurant and ferry. What strategies will you recommend so your client continues to maximize its profits given that it is in a oligopoly? What exactly are the potential risks associated with these strategies (400-600 words)
In the following year when a new business get into the market, it'll lead to totally change the market framework from monopoly to oligopoly, as there are two businesses now competing with one another. In such circumstances there are two prospects for these competing organizations. First one is these two firms will keep competing with one another by indulging themselves into price and non-price contests. The other likelihood is that they will come at an contract and will form a cartel. The cartel will serve to boost the profits for both firms. This is due to the fact that if they keep competing then they must lower down the prices which will subsequently reduce profits of both and they'll come at a rate at which income is quite less than the monopoly profits. Alternatively if indeed they form a cartel they will be able to enjoy the monopoly powers. These two firms will have complete control over the purchase price and quantity and will be able to demand a higher price as there is no swap available for the services provided by this cartel. Cartel is described a formal and explicit agreement between several competing organizations which is targeted to create the monopoly forces for the companies in order to improve the degrees of profit. In this case the two businesses dealing with the business of restaurants, cottages and ferry will consent to fix the rents marketing or production. Creation of cartel is based upon the nature of market and here the nature of market i. e. oligopoly is ideal to enjoy the benefits associated with cartels. The people of cartel reach an arrangement and then act together as being a single retailer, with shared consensus, in order to have an influence on the prices of goods and services. They control these prices by acquiring a control over development and marketing. The two members will have to agree after certain factors like share in industry's provision of services, market stocks and fixation of prices. They come at an arrangement after having completed thorough negotiations on conditions and conditions of the key matters.
In this case additionally it is an important account to decide about allocation of territories, customer's allocation, creation of common sales companies bid rigging and section of earnings among these two companies. Their joint target will be increase of success by reducing your competition in the market. If both of these firms remain successful in acquiring authorities shield about the formation of cartel then this cartel will be known as public cartel and the enforcement of cartel arrangement will be made certain by the state. On the other hand if they just try to give attention to the benefits associated with the two businesses who constitute after that it it will be named private cartel. As compared to private cartel it'll be more beneficial for the society all together that these two businesses form a general public cartel, due to the fact that in case of public cartel the huge benefits are handed down to the respective society all together. It is discovered that competition regulations are always found to oppose the forming of cartel therefore these two firms will have to keep in mind the guidelines and regulation associated with the development of cartels in the united states so that they may ensure their long run existence in the market. However, it will always be very difficult for law execution agencies to confirm the existence of cartel in any market. To avoid the disclosure of including in cartel making and ensuing negative repercussions often companies do not paper the hidden agreements existing included in this. These firms will try to regulate supply with an try to regulate the prices being costed for the services provided by two.
Q# 3 3 years later there are 20 companies providing cottage lease, restaurant and ferry services to Partridge Island. What strategies could you recommend to your client to maximize revenue given that it runs under monopolistic competition? (400-600 words)
Now there are twenty companies in the market meaning that now the nature of competition is comparable to that of monopolistic competition where there is a reasonable quantity of firms in the market competing with each other. To be able to keep up with the position of the individual firm in a market also to ensure the success firms compete on the basis of product differentiation. No company can survive in the industry if it ignores the strategy of product differentiation. Product differentiation means that companies try to generate differences in their products or services to make their products attractive as compared to those of rivals. The purpose is to obtain the appeal of buyer in order to boost the demand for the merchandise offered and resultantly to increase the profits.
The revenue maximization will occur at the same point as it is in monopoly i. e. a point at which Marginal Earnings is equal to marginal costs. Firm will produce outcome and charge the price corresponding to the intersection of marginal income and marginal cost. As far as the strategies to maximize profits are worried the primary strategy which must be accompanied by the company is to build differentiation in the assistance made available from this firm. They will have to discover various ways to make their services as well, it will ensure the go up in the competitive advantages from the services offered. These dissimilarities in the assistance may be of real nature or that of an imaginary one. Real distinctions involve a genuine services. These dissimilarities that ought to be created by the company in order to increase the profits can also be of imaginary nature for example simply changing the design of services provided. In this case there will be no real difference in the assistance but by changing the presentation style, customers are certain to get attracted to the services of the particular firm and can prefer this firm among other twenty businesses functioning in the same industry. It is regarded as very important in neuro-scientific business dealing with cottages, restaurants and ferry to keep up a unique position in the market particularly when there a wide range of firms competing. In this particular industry the value of services provided is like that of lifeblood in the human body. Therefore, it can be suggested that this firm must improve the expectations of services, including that of staff and related to the comfort of customers. Customers comfort should be of key importance for the organization also to do to allow them to do many different things. For restaurants and cottages they have to improve the living conditions including furniture and food provided to the customers. So far as the case of Ferry is concerned user-friendly services should be provided and do so they must relax the terms and condition elated to the transport of goods and they may also maintain their position in the market by offering relatively low prices when compared with those made available from competitors. The strategy to reduce prices will have a good impact to raise the preference for this company among customers.
Q# 4 Ten years later we find a huge selection of companies providing the same services. What strategies will you recommend to your client to maximize its revenue in a perfectly competitive market? If the client was losing money, when do you recommend it shut down its activities so when should it leave the industry altogether. (400-600 words)
Ten years later when there are a huge selection of new companies in the market the monopoly vitality confronted by the firm will totally abolish. The firm will haven't any control over the purchase price charged from the clients. The primary reason behind this is the fact now there is large numbers of businesses offering almost the same services, so of the firm attempts to charge a higher price it'll lose its customer a they has a large choice available in the form of providers of cottages, restaurants and ferry. The company will become a price taker one and will have a decision to take only one decision that is of number to be sold. The marketplace structure now resembles that of perfect competition, with large number of buyers and retailers, free entry and exit and having almost perfect substitutes available. In this case the firm cannot charge high prices for some of cottages, restaurants and ferry as there are large number of companies offering almost similar services so the rise in cost will donate to shift the customers to any other service provider, hence contributing to decrease the locations of client firm.
In a flawlessly competitive market it becomes quite difficult to generate excessive profits in a long run. However there is a possibility that company enjoys abnormal income in a nutshell run that will encourage the access of new firms in the industry and this system will lead to decrease the abnormal income savored by the firms. To be able to maintain a revenue increasing level the strategy followed by the organization should be based on the production of productivity or provision of services, anyway level of average cost curve. In other words company should produce at a level which is ideal for this and at which the costs experienced by the organization are reduced. The strategy to produce at best level will lead to create at least normal gains for the firm in long haul and it could earn heavy profits in short run. Inside a correctly competitive market firm should never make an effort to compete based on prices as it would end up being a pointless strategy. As far as the general rules of profit maximization are worried the gains are maximized at a spot where in fact the Marginal cost curve intersects the marginal revenue curve. Furthermore the slope of MC is more than the slope of MR. Here's properly competitive market the Marginal Earnings (MR), Average Earnings (AR) and price (P) curves are the same. These curves are symbolized by the in a straight line series which is horizontal to the X-axis exhibiting that the organization has no control over the price of its service or product. The optimal outcome is not merely determined by the price information instead the knowledge of cost and demand conditions permits the firm to look for the optimal degree of output which maximizes its success. The demand curve can be acquired by plotting sales revenue at different degrees of output. The perfect outcome of the company is delicate to the price and costs associated with it, resultantly whenever the cost conditions or the costs of services in the restaurants, cottages and ferry market change, then the optimal output of the particular firm may also be altered. As here are present powerful rivalry among the business of restaurants, cottages and ferry, therefore the firm should try to introduce new products, improve the quality of existing products and make more advertising expenditures. Additionally it is vitally important to timely respond the strategies of opponents in the market.
Question 2 (8 items) (400-600 words)
How can changes to the labour market be associated with changes in income distribution? What could be driving a car income disparities between high-income earners and low-income earners (in Canada or elsewhere)? What may be the negative impacts of the disparities? Are these short term differentials or equilibrium differentials? What insurance policies could government put in place to improve income opportunities for low-income earners? You need to bring from chapters 13 (specifically income distribution), 14 (all) and 16 (particularly income syndication).
Due to the wage restraints all over the world, people on top end enjoy the majority of the benefits associated with economic gains giving majority of the folks deprived of the advantages associated with production processes. The status and position of migrants, women and minorities is unpleasant in the income distributions of almost all of the countries. The major contributor to promote income disparities and inequalities worldwide is decreased powers of labor unions. These unions remain unable to secure an acceptable rate of salary due to weakened bargaining electricity associated with them. A continuous and long-term decline in labor union memberships has also been observed in the past and the development still continues. Addititionally there is negative impact of To Work Laws on the equivalent distribution of resources in an economy. These laws and regulations on the main one hand benefits in reaching public welfare and on the other have unfavorable effects on the income syndication, while promoting the problem of inequality in the country. Moreover, in case there is Canada the payments established by labor unions are also quite low to ensure the well-being of low income and middle class classes.
The distance between wealthy and poor as displayed by the income inequality is widening these days in Canada and the income inequality is far higher than the level of which it was thirty years back. The inequality and only rich is posing serious threats to the market as it is adding to increase the level of aggregate demand, hence promoting highly growing inflation in the country. Poor is battling a great deal and resources open to this class for the purpose of education or for investment running a business are extremely few. This is the major reason that poor stay trapped in to the vicious circle of poverty and wealthy get richer daily. Additionally, another impact of income inequality is the fact it leads to generate increased possibility of financial distress for the current economic climate which may serve to hinder the improvement in long run. Due to distress in the contemporary society induced by income inequality, the criminal offenses rates can also increase e. g. it is often witnessed that poor section of society enjoy itself into criminal activities like murders, to be able to produce money for themselves and their children, in order that they may the essential needs of lifestyle. As far as the overall welfare of world can be involved income equality helps it be impossible to provide similar facilities to different sections of culture. Among these the most important outcome of in equality is reduced availability of health facilities which results in lower life span especially for the situation of poor, who have limited resources to obtain proper food and health facilities.
These differentials existing between different sections of society may end up being if long run character if not managed with proper regulations of private and general population sector. In case of Canada the differences are persistent in characteristics, therefore, it could be concluded that these dissimilarities between wealthy and poor are of long term aspect in Canada. To be able to offer with the income inequalities federal government can choose fiscal insurance policy changes like this of tax insurance plan change. The actions to adopt progressive taxation can prove to be very helpful. One other way regarding tax insurance plan is to tax the non-parents in Canada as no -parents have much larger median incomes as compared to the parents. Furthermore, the responsibilities of parents are bigger than the non-parents and it is very beneficial to provide them an convenience in the form of tax break. Taxes rate should be higher on the incomes of companies as the manufacturers comprise that section of world which is comparatively wealthier. Government can also provide ease to the indegent section to have them from the poverty trap, in the form of subsidies on the products utilized by poor. In addition different allowances and benefits should be designed by the federal government of Canada to aid poor so that the disparities can be removed and income distribution may get equal for all the sections of culture.