Market Disruption by New Entrants
A market for a specific good was historically dominated by a cartel of three large companies that successfully coordinated to maintain high prices. Due to a technological innovation that lowered production costs, ten new, smaller companies have now entered this market. Explain the two most significant economic effects this influx of new firms is likely to have on the market, specifically addressing the price level and the stability of the original cartel.
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Social Science
Empirical Science
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Analysis in Bloom's Taxonomy
Cognitive Psychology
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For many years, a small town had only one company providing high-speed internet service. Recently, the local government passed a law that removed barriers to entry, and three new companies have started offering competing services. Based on this change alone, what is the most likely outcome for the residents of this town?
A powerful landowner controls a plot of land and can dictate the working hours of a tenant farmer. The tenant has a 'survival threshold' which represents the minimum combinations of grain and free time they are willing to accept. The landowner's goal is to maximize their own share of the grain harvest while ensuring the tenant remains at this survival threshold.
Currently, the tenant is working a certain number of hours. At this specific allocation:
- The rate at which an additional hour of the tenant's labor can be transformed into grain is 3 bushels.
- The rate at which the tenant is willing to give up an hour of free time for more grain (while staying on their survival threshold) is 2 bushels.
What should the landowner do to increase their own share of the grain?
Ride-Sharing Market Merger
Market Impact of New Entrants
A country's law mandates a new wealth redistribution tax if its Gini coefficient for wealth is calculated to be above 0.90. An initial analysis, using a common approximation method based on the ratio of areas in a wealth distribution graph, yields a coefficient of exactly 0.90. A government agency, seeking maximum precision, commissions a second analysis on the same data using a method that computes the average difference across all possible pairs of individuals. Based on the typical relationship between these two calculation methods, what is the most probable outcome of the second analysis and its policy implication?
Market Disruption by New Entrants
If two of the four major coffee shop chains in a city merge into a single, larger company, the most probable outcome for consumers is a decrease in coffee prices due to the new company's increased efficiency and purchasing power.
Match each market scenario, described by a change in the number of competing businesses, with its most likely direct impact.
Sustainability of Collusive Agreements
Evaluating Policies for Market Competition