Question

Conducting your own investigation, provide a discussion on ONE of the following three issues:

a. A Cartel: Find a real world example of legal actions being taken against a cartel. Discuss the regulatory framework, its economic rationale, its effectiveness, the incentive structure associated with the detection methods, and compare it with policies used in other parts of the world.

b. A Patents: Analyse a specific patent of your choice. Discuss the regulatory framework, its economic rationale and adequacy, the incentives for R&D, the intertemporal aspect of profit-making, and related policy issues.

c. A Natural Monopoly: Analyse a regulated natural monopoly of your choice. Discuss the regulatory framework, its economic rationale, pricing and incentives, efficiency and welfare, alternatives and related policy issues.

Expected length: 500 words (excluding references).

Marking criterion

Depth of Research: 25%

Originality: 25%

Depth of Analysis: 25%

Presentation: 25%

Answer 1

Let us discuss the third point: A Natural Monopoly

                                  Monopoly refers to the type pf market structure, where, the market demand and supply and in more depth, even the production and supply is being controlled by an individual, firm or an institution. The individual, firm or institution is referred to as the Monopolist. In a monopoly the overall market decisions and dividends and taken up by the monopolist and the other smaller firms or businesses just follow the decision and make their small adjustments in order to maximize their profit. Let us discuss an example of a natural monopolist in detail.

                                   For a very long time, Kentucky Fried Chicken (popularly referred to as KFC) had been a monopolist in its market of fried chicken sales. Presently, we have a few competitors in the market, but KFC continues to be the market leader. It has even become very popular outside America and it one of the most desired food chains across the globe. KFC works on very rigid and well directed regulations which are governed by the ethical oriented market decisions as per which, KFC ensures that it does not compromise on the quality of the product, and moreover the service rendered to the consumers is of a very good quality. KFC has been accused of charging very high prices for its products in the initial few years. What kept, KFC still up float is the delicious taste of its products for which the consumers were ready to pay any price. However, KFC has done huge cut in their prices after it began to receive some competition from other like producers and firms. The products and goods sold by KFC cannot be considered as a rationale way of product purchasing. These products are semi-luxury products that the people enjoy with their family and friends. Therefore, KFC cannot be considered rationale since the products it sells does not have any rational importance. Its whole substance if on the desire of the people to have something outside the home and that something could be chicken fried in delicious mixtures.

                                           Market efficiency of KFC is very high since it has managed to grab on to its customers with very intuitive and well managed firm. It has produced huge profits (extra-normal profits). The consumer, in the liking of its unique and deliciously fried chicken is ready to spend money on the product. However. The welfare level of KFC is limited to only customer satisfaction. It does not add any other direct or indirect effect or welfare to the economy. Yet, KFC continues to be one of the most popular and desired food chain firm across the globe.