Reference no: EM133175081

1. Essay

International trade can have big effects on domestic markets. For both an import good and an export good (in other words, address each bulleted item below twice-once for import and once for export), describe how opening up to international trade affects the following:

- supply or demand for the particular good,

- the competitiveness of that good's market, and

- how the change in competitiveness affects equilibrium price and quantity.

Stepping away from the import/export examples, describe how opening up to trade specifically affects a domestic monopoly. Include an explanation, using game theory, of how even a single additional competitor can lead to a market outcome similar to perfect competition.

2. Essay

Auctions can be an important tool for selling goods and gathering information. Auctions are used in multiple venues including agriculture, eBay, and distressed asset sales. The seller does not have to worry about estimating demand and setting a price because the demanders will do that through the auction process.

Write an essay examining the value of auctions in the economy by addressing the following items.

- Explain the difference between oral auctions and second-price auctions, including how they work and their results.

- Use the expected value information to illustrate how having more bidders in an oral auction will likely result in a higher winning bid.

- Explain how the number of bidders in a common value auction affects the outcome of the auction. Relate this to the effect on price in different market structures based on the number of producers.

- Auctions lead to outcomes where buyers reveal their value for the products being auctioned. To successfully price discriminate, firms often rely on buyers revealing their value for products. Explain the conditions necessary for firms to be able to price discriminate.