Reference no: EM132412245

Discussion Questions:

1. You're visiting the pyramids of Teotihuacan, near Mexico City. As you walk by the pyramids, several artisans approach you with their products - hand carved obsidian goods. As you walk, you notice no real difference between the goods - the obsidian turtles mostly look like turtles, the necklaces are made of the same leather... you decide to learn how to hand carve these goods, and sell them. As it turns out, you can learn in only a couple of days, and the startup costs are only a block of obsidian...

What kind of market is this? Why (list the properties of the market)? At what price could you sell your obsidian products? Could you decide the price?

2. Find a company who is or was a monopoly. Tell us any inefficiencies that the company suffers due to being a monopoly. Who sets the price in this case? Remembering back to last week's discussions - I asked you who sets the price in a perfect competition, and some of you answered that you do decide the price - in perfect competition the market decides the price (in other words the buyers), not the sellers. But in the case of monopolies, who decides the market price of the products?

3. Name a case of price discrimination. Can you resell the product after purchasing it? Lastly, can you explain why it is that first class costs so much on airplanes, why it is that economy class is getting more and more uncomfortable? (Hint: look up United's "Economy Plus")

4. When does entry into a monopolistic competition stop? What deters entry in this case?

5. Find a company that operates in monopolistic competition, and compare the 4 features of a monopolistic competition to the company (number. of buyers, number of sellers, differentiated product, and barriers to entry).