Alberta Distance Learning CentreCHEMICAL 314Economic.

1a.Explain using the above examples why a monopoly is problematic for a given economy or a government? Monopoly is always considered to be bad for a nation's economy since an organisation never hesitates to set up the ...

1a.Explain using the above examples why a monopoly is problematic for a given economy or a government? Monopoly is always considered to be bad for a nation's economy since an organisation never hesitates to set up the price on the higher side. Its customers do not have the choice to do something against the company. A good example of a monopoly is American Telephone and Telegraph Company (AT&T) and De Beers Group in the US, which were close to solitary producers in their time era. Both companies were criticised for being monopolies by antitrust law of the US, raising the prices of their products and creating inflation in the economy. 1b. Reflecting on examples from the article explain how public policy can curb Monopolies? The article given in the assignment states that there are several companies, Standard Oil and American Tobacco, U.S. Steel, which were making unusual profits by raising the prices of their core products. Also, the monopolistic organisation may deliver poor quality products to its clients. However, the government can alleviate the adverse impact of monopoly by bringing new norms in public policy: average cost pricing, imposing taxes and declaring price cap. Moreover, the government can also regulate mergers and acquisitions to curb monopolies. 1c. Using cost curves explain how Monopolies make unusual profits? In the above diagram, the monopolistic companies decide the level of output when MR(Marginal revenue) is equal to MC(Marginal cost). Then it considers the price from P2 to P1( increasing the price). However, the quantity of production will be fixed. Therefore, it makes excess profit by increasing the price of its core product while not considering the level of output. Large profit also attracts more sellers to sell the product. But due to monopolistic organisation, which are only a manufacturer of the products, makes a seller have a second thought when it comes to trading since monopolistic companies would also make a huge amount of profit by selling it. 2(a). What are the equilibrium price and equilibrium quantity of sweet packs? The table is given in the assignment the equilibrium price is 80 and the equilibrium quantity is 130 It means that when the demand and supply of a producer are equal, a producer determines the equilibrium price and quantity. 2(b). If chips were 50 cents a bag, describe the situation in the market for sweets and explain what would happen to the price of a pack of sweets. The quantity demanded would be more than the quantity supplied if chips were 50 cents a bag. Thus, the price will be increasing continuously unless the demand and supply become equal. 2(c). Use the above data to draw a graph with the correct labelling. Fig.2. Increasing demand of quantity and decreasing supply of quantity 2d. Explain what is the price elasticity of demand and explain why it would be important for producers to know the price elasticity of their product and how it would affect their decision making? Price elasticity of demand states that the quantity demanded depends upon its price. It shows the percentage change in a price directly influences the percentage change in quantity demanded. For instance, if commodity price declines by 2%, the quantity demanded will be rising automatically with the same percentage. However, The other factors will remain stagnated. Importance of price elasticity of demand It greatly assists in decision-making for manufacturers. In various areas: ensuring business management, measuring the level of production, deciding the level of price. It helps monopolistic companies to choose a different price for different products, which have a less elastic and high elastic demand. Judy’s income has increased from $10,000 to $12,000. Judy increased her demand for concert tickets by 10 percent and decreased her demand for bus rides by 5 percent. 3a. Calculate Judy’s income elasticity of demand for concert tickets Income elasticity for concert tickets is calculated as percentage changes in quantity demanded is divided by percentage change in income for normal goods. In the above question, the income is increased by $2000, that is 20%. At the same time, Judy’s increased her demand for concert ticket by 10%. Thus, her income elasticity for concert tickets will be,10/20, 0.5%. 3B. Calculate Judy’s income elasticity for bus rides. Judy’s income elasticity for bus rides will be calculated with the same formula, which was used in the previous question. As we know that, her income is increased by $2000, and her demand for bus rides is decreased by 5%. Thus it will be -0.25% 4a. Graphically demonstrate how the supply of labour in the U.S. is affected by the increase in the labour force resulting from Mexican immigrants. Immigrants from Mexico have a long-term impact on wages and the rate of employment. They are the contributors to the growth of the economy. They have increased the labour force in the country. First-generation immigrants are costly for the government as compared to native-born. But the second generation is very talented and have good skills to help the US in achieving their overall growth. They don't only affect the environment of the US but also interacts with new policies regarding labour supply. There are multiple types of immigrant labourers that affect the supply of labour in the US. They are different based on their skills, education and experiences. It can be considered that mainly there are two types of labourers high skilled and low skilled. It can be based on their schooling, how do they perform job etc. Firstly we will talk about low skilled labourers which will no doubt increase the labour supply but also affects the country.