To what extend do you think law of demand depends on the law of diminishing marginal utility? If marginal utility was increasing when quantity of a good consumed increase, would there any change in consumer behaviour?

Identify and describe sources of labels. Next, discuss how labels from the juvenile justice system can be devastating on our youth.

Question 1 :

1. What effect does the entry of new firms have on the economic profits of existing firms in a monopolistically competitive market? Elaborate your answer with appropriate examples.
2. Why a firm remains in business even by earning zero economic profit? Elaborate your answer.

Question 4: Why some governments resort to price ceiling and price floor for some goods and services? Describe three most important disadvantages of price ceiling and price floor? In what conditions do you think that price ceiling and price floor may contribute to welfare of people?

Question 3:

What are the determinants of demand for labor and supply of labor? How the equilibrium wage rate is determined in labor market? Why a janitor gets lower wage than a heart surgeon? Explain

Question2:

1. Elaborate the three most important characteristics of an oligopoly market. Give three examples of oligopolistic industries in Saudi Arabia.
2. What is a patent? If a patent serves as barrier to entry, why do governments issue patents?

calculate the Gini Index of the following income distribution of 10 people:

10,10,10,10,10,10,10,10,50,100

Question 1 :

1. What effect does the entry of new firms have on the economic profits of existing firms in a monopolistically competitive market? Elaborate your answer with appropriate examples.
2. Why a firm remains in business even by earning zero economic profit? Elaborate your answer.

Question2:

1. Elaborate the three most important characteristics of an oligopoly market. Give three examples of oligopolistic industries in Saudi Arabia.
2. What is a patent? If a patent serves as barrier to entry, why do governments issue patents?

Question 3:

What are the determinants of demand for labor and supply of labor? How the equilibrium wage rate is determined in labor market? Why a janitor gets lower wage than a heart surgeon? Explain

Question 4: Why some governments resort to price ceiling and price floor for some goods and services? Describe three most important disadvantages of price ceiling and price floor? In what conditions do you think that price ceiling and price floor may contribute to welfare of people?

Expert Answer

• Sayantan Banerjee answered this

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  AS PER CHEGG POLICY, I CAN ONLY ANSWER THE 1ST QUESTION

  In a mopolistically competitive market, firms are not price takers. They are price makers. So they decide their own price. So in the short run, firms can have supernormal profits. That is they can set any price they want to and get high economic profits. However, since the market is very much price elastic, so unless the product is differentiated, it is not possible to continue this supernormal profits.

  Here we now consider multiple firms whose products are not similar but very near substitutes.

  Now let's say there is a new entrant in the market. The barriers to entry are quite low. So they can easily enter the market. What is the incentive of a new entrant? Since the economic profits are very high, a new firm is enticed to join the market.

  As they join the market, the quantity of products in supply increases. This leads to a lowering of the supply curve. Due to this, the equilibrium price will also go down. Now since the cost of production remains the same, the economic profit of the firm goes down.

  So with each new entry in the monopolistically competitive market, the economic profit of all the firms go down to a point where the economic profit is zero.

  At this point of time, no new firms have any incentive to join the market as they would not get any profit. In spite of that, let us consider that some firm joins. This reduces economic profit from 0 to negative for all the firms. As a result, firms will start to leave the market. If more than one firm leaves, the profits go up and become positive. This creates space for new entries. So the number of firms goes on increasing or decreasing as the case may be till they converge to a optimal number where the economic profit is zero.
  
  
  So if a new firm enters a monopolistically competitive market, in the short run, the economic profits of all the firms decrease and in the long run they become zero.

  Let us consider an example of restaurants. There are many restaurants and infinite customers. The restaurants have priced their food such that they make an economic profit EP. Now there is a new entrant. They price their food lower(to attract customers) and their food is a good substitute of what is available in the market. SO people will start moving to them. Now either they increase prices to reap more profit, or if they have the bandwidth to accomodate the increased rush, they keep on getting customers. This leads to other restaurants to lower their prices as well or face losses. Thus the overall market has a lower price. this means the economic profit for all the firms have gone down.

  Now there is another newer entry at a lower price. So other players can also start undercutting their food prices.

  These new entrants keep on coming and thus prices keep getting lowered till one restaurant has reached the point of Zero Economic Profit. No restaurant will be able to cut prices beyond this point. So All restaurants will converge to this price point to get a level playing field. Thus in the long run, the economic profit becomes zero.

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Question2:

1. Elaborate the three most important characteristics of an oligopoly market. Give three examples of oligopolistic industries in Saudi Arabia.
2. What is a patent? If a patent serves as barrier to entry, why do governments issue patents?

Question 4: Why some governments resort to price ceiling and price floor for some goods and services? Describe three most important disadvantages of price ceiling and price floor? In what conditions do you think that price ceiling and price floor may contribute to welfare of people?

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