Reference no: EM13541144 , Length: 1000 Words

Please choose only ONE of the following five questions. Write your response in 1000 words and include references!!

The solution file conatins the Answer for Question 4.

Q1 (A) In the context of a competitive market, what are the impacts on price, quantity, and the outcomes for producers and consumers, of a shock to the marginal cost of production that hits one sector of suppliers? (Alternatively: you may consider a change to the benefit on the demand side, or the imposition of a tax or subsidy by a government.) How do these impacts depend upon the size of the affected sector, and the properties of supply and demand?

(B) Describe a real situation in which a sector of supply or demand was or will be hit by a change to costs, to benefits, or to taxes and subsidies. Using your analysis from (A), evaluate the consequences for the market's participants.

Q2 (A) Is a "perfectly competitive market" an efficient mechanism for the allocation of scarce resources? When it is, explain why. When it is not, document rea- sons for either inefficient or undesirable outcomes.

(B) Describe a real-world situation (either in the private sector or public sector) in which your answer to (A) could have been used to achieve either a more efficient or more desirable outcome for the relevant stakeholders.

Q3 (A) Consider a profit-maximising monopolist (or some other supplier with mar- ket power) selling a single product. Explain how aspects of the product's design and the market environment may influence the shape of demand, the supplier's optimal output and price, and the supplier's profitability.

(B) Describe an actual product (or products) where a supplier controls the design and marketing. How might your answer to (A) inform the choices of advertising, marketing, and product design?

Q4 (A) Pick one type of price discrimination. Explain: (i) the design of such a pricing mechanism; (ii) what a supplier needs to know in order to use this scheme; and (iii) what constraints are faced in the use of the technique.

(B) Describe a real-world example of this price discrimination strategy, and re- late it to your three explanations (i), (ii), and (iii).

Q5 (A) In the context of an appropriate oligopoly theory, explain the channels via which either a cost reduction (a process innovation) or a quality increase (a product innovation) influence a supplier's profitability.

(B) Describe a real situation in which a supplier faced (or faces) an innovation opportunity. Explain why the oligopoly model described in part (A) is suitable for this situation. Evaluate the supplier's innovation decision.