Economics Term Paper
Just as Governor Bradford discovered during the famine at the time of the original Thanksgiving, we must allow for an unrestricted government and let the "invisible hand" go to work. When there is a competitive market after an event such as Hurricane Charley, it allows for equilibrium to still take place. Doing this allows the average total cost to stay as close to the norm as possible. This would be true because otherwise it would be at the expense of the seller to purchase more supplies than normal and would in turn cost him more than he would typically pay for each product. A competitive market would allow this seller, in his presence of high demand, to keep his constant returns to scale as close to how it was previous to the hurricane. Otherwise the seller would experience a diseconomy of scale as equilibrium would not be ideal. One of the three basic insights to market outcomes states that free markets produce the quantity of the goods that maximize the sum of the consumer and producer surplus. Having a laissez-faire market during a time like this would most likely uphold this insight.
As displayed by the graph, less output and higher prices emerge from a monopoly. The graph shows that the price is higher and the output lower than the competitive market equilibrium. In order for the store owner to maximize profits, he would have to find out at what cost the marginal revenue equals marginal cost. Because of this new imposition, the owner's new prices would not display the marginal cost of producing the goods. If the situation were to stay the same, the owner would be forced to leave the business instead of charging such low prices. Boudreaux's letter in response to Hurricane Charley says, "Higher prices are simply a means of informing consumers that existing supplies must now be economized on more carefully than before. Instead of regulators reducing prices every time cost drop, they would have to let the owner keep some of the benefits of lowered costs. In conclusion, monopolies make less than efficient quantities of goods in society and charge prices above marginal cost. Robert Johnson writes a rebuttal to Mr. By regulating his prices, it would also give the owner no incentive to reduce costs. Boudreaux's letter stating that price-fixing in monopolistic markets is a fallacy when in fact they could happen. The owner's average cost pricing could then be instead looked upon as something as burdensome as a tax. In that situation, if these new prices equaled the average total cost, the owner would be earning zero economic profit. It doesn't necessarily mean that the existing supplies have to be economized more, but just the remaining products will cost more.
Common topics in this essay:
Hurricane Charley,
Robert Johnson,
Governor Bradford,
marginal cost,
average total cost,
competitive market,
average total,
total cost,
boudreaux's letter,
existing supplies economized,
supplies economized,
store owner,
existing supplies,
hurricane charley,
owner's average,
|
Acceptance Essays
