Question

 

a. How luck (or randomness, or industry instability) can lead to concentrated market structure

b.  Economies of Scale/Minimum Efficient Scale

c.  Discount rates (rates of time preference) and their role in promoting collusion in oligopoly

Answer 1

 

1. Luck, randomness and industrial stability plays a vital role in resulting in concentrated market structure. Many at times luck works much better than practicality and assumptions in the market structure. The industrial stability is needed for better working conditions and a good market structure.
2. The economies of scale are the cost advantages that are reaped by the companies when the production becomes efficient enough. The companies would achieve the economies of scale due to increase in production and lower the costs. This happens due to the costs being spread over the larger number of commodities. It can be internal and external as well.
3. Discount rate is the interest rate which is charged to the commercial banks and many other financial institutions for loans which they take from the Federal Reserve Bank through the discount window and loan process. It refers to the interest rates which are used in discounted cash flow. The discount factor affects the oligopoly prices in a certain way.