ECON224-1101A-02 Macroeconomics
Assignment Name: Unit 2 Individual Project Deliverable
Length: 2–3 pages
Details: You want to start a company, and are trying to decide between two different industries. You are doing your final research before you write your business plan.
Industry A has 20 firms and a Concentration Ratio (CR) of 20%
* What is the name for this type of industry?
* Describe some of this industry's characteristics.
* If you were in this industry and there was an increased demand for the product that pushed up the price of goods, what long-run adjustments would you expect?
* What does your anticipated adjustment process imply about the CR for the industry?
Industry B has 20 firms and a Concentration Ratio (CR) of 85%.
* What is the name for this type of industry?
* Describe some of this industry's characteristics.
* What are some reasons why this industry has a high CR while Industry A had a low CR?
* Is it possible for smaller firms to thrive and profit in Industry B? Why or why not?
Minimum of 6 in-text citations with references
Please submit your assignment. For assistance with your assignment, please use your text, Web resources, and all course materials. Please refer to the following multimedia course material(s):
* Unit 2: Microeconomics: The Basics
* Unit 2: Present Value of Future Income
Points Possible: 150 Date Due: Sunday, Feb 20, 2011 #
Objective: Apply a core of economic principles and reasoning to a variety of applied topics # Match a core of economic principles and reasoning to a variety of applied topics Submitted Files: Submit Assignment Score: N/A Instructor Comments: The study of markets is called industrial Organization. There are four basic markets that are discussed in economics: perfect competition, monopolistic competition, oligopoly and monopoly. Note that you are not selecting which market to enter. You are providing the information on each type of market. Perfect competition and monopolistic competition are associated with no barriers of entry in to the market and in the long run economic profit is driven to zero for existing firms. Oligopoly and monopoly are associated with high barriers to entry in the market and with market power, the ability to control the market price. Begin with the "Types of Market Structure" in Figure 14.1 in Chapter 14. (Krugman and Wells, 2009) or "Between Monopoly and Perfect Competition" in Figure 1 in Chapter 16 (Mankiw, 2009) A market can be defined as a relationship between buyers and sellers engaged in trading. An industry can be defined as a group of firms producing the same product and competing for resources to produce that product and competing for markets. A key term to use is "economies of scale" (See Figure 14-3 in Chapter 14 in Krugman and Wells, 2009) which the author sometimes calls increasing returns to scale. In Mankiw, 2009, see Figure 1 in Chapter 15 A market can be defined as a relationship between buyers and sellers engaged in trading. An industry can be defined as a group of firms producing the same product and competing for resources to produce that product and competing for markets. Industry should be interpreted as "market type or market structure" In Krugman and Wells, Firms in competitive markets (Perfect Competition) Chapter 13 Monopoly Chapter 14 Monopolist Competition Chapter 16 Oligopoly Chapter 15 The concentration ratio in IP for Unit is called Four Firm Concentration Ratio = CR 4. The four-firm concentration ratio (CR4) measures the percent of total market sales accounted for by the top four firms in the market. You are not expected to name a particular product market; you are expected to use the theory for your choice of market type to respond to the IP questions and tasks. Additional detailed information on concentration ratio may be found at (1) Cesar Cancho, Texas A&M University, ECON 202: Principles of Microeconomics: "Review Session 3." taken from econweb.tamu.edu/ccancho/Files/RS3.ppt (2) Carl Gwin, Babson College, A Guide for Industry Study and the Analysis of Firms and Competitive, Strategy, http://faculty.babson.edu/gwin/indstudy/index.htm (3) Schramm, William. "Oligopoly," Roane State Community College. Taken on June 8, 2010 from http://www.roanestate.edu/webfolders/SCHRAMMWE/Krugman-202/12-Chap15-Oligopoly.pdf
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