at minimum 15 sentences long, it must answer every part of the question, it must
ID: 1196092 • Letter: A
Question
at minimum 15 sentences long, it must answer every part of the question, it must include economic concepts that were taught in class and where necessary provide real world examples and empirical data. You must also explain your conclusions.
Question — What is the Structure/Organization of Our Economy?
Perfect (Pure) Price Competition and No Economic Power Or Oligopoly and Economic Power
What is a perfect (pure) price competition model and what are its assumptions? Explain in detail how the price competition model is supposed to work, its process and the outcome (this includes many components relating to the quality of goods, the type of ‘playing field’ that production and price competition takes place on, consumer sovereignty, etc.). Does this model hold logically and empirically? Explain.
From the heterodox perspective, how does an oligopolistic competitive market work in the real world? Include the assumptions behind this perspective. Does this model hold logically and empirically? Explain. Why does the prevalence and dominance of positive feedbacks support an oligopoly structure over a perfect (pure) price competitive structure (include readings)? Why is it that oligopolistic firms do not compete over price and find it advantageous to collude and fix prices (a recent case involved Procter & Gamble and Unilever, 2011)? Note here that fixing prices is the exact opposite of a perfect price competition model.
What is the ‘logic’ of the production system (i.e., M-C-M’ or C-M-C’) from the orthodox and heterodox perspectives and what does this have to do with the structure/organization of our economy? Explain the difference between these two logics. Given the logic of each, what drives the economy forward (i.e. gets it moving) from these perspectives, supply or demand? Explain the process of both.
Please answer each of the questions, and put every answer after questions, because then I can see how it related.
Explanation / Answer
A perfectly competitive firm consists of a market with many buyers and many sellers selling identical goods with complete substitutability. Firms have no control over the market and take the market price as fixed.
Assumptions: many buyers many sellers selling identical products at fixed prices along with free entry and exit of firms
Price: price is set at the efficient level where P=MC. This is the efficient price level selling the good at the minimum price possible. Ang price below will lead to losses.
It is logically possible for this market to exist like market for eggs and price competition exists.
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