MONOPOLISTIC COMPETITION

Identify an industry that is likely to be monopolistic competition.

a. Make up a company that has a product in that market and explain the features of that product and why it is profitable.

b. Draw the market diagram for that company.

c. Show that company earning profits.

d. Explain why that company's profits will only be temporary.

e. Explain how that company might regain its profits.

f. Explain why economists believe this market structure is inefficient.

g. What would happen if once your company was profitable, the government taxed 80 percent of your profits away (the government took your profits).

h. What would happen if the cost of your labor goes up since labor is short and competing companies are bidding up the price of labor?

2. ECONOMIC EFFICIENCY AND INEQUALITY

Using the terms and concepts of this course please respond to the following:

Person 1 -"A perfectly competitive market definitely drives us to efficiency, that makes it a real positive aspect of modern times for human beings."

Person 2 - "Maybe, but you know the outcomes of capitalism and competition in terms of the fair distribution of income and wealth are terrible and actually hurt efficiency. I think that the government should do something to improve efficiency and output."

Explain these two statements using the concepts, diagrams and facts we have learned.

3.

Consider the economic way of thinking that we have learned this Semester and answer JUST ONE of the following (either "a" or "b"):

a. Select one of these ideas: minimum ATC, perfect competition, monopoly, monopolistic competition, inequality

Then, i. define it, ii. describe its connection to scarcity, iii. and use one of your own real-life experiences and apply that real-life experience to that idea (as an economist would).

OR

b. Select one of these ideas: minimum ATC, perfect competition, monopoly, monopolistic competition, inequality

Then, i. define it, ii. describe its connection to scarcity, iii. and critically assess the value of that idea (as an economist would use it).