In chapter 16 David Colander writes about what firms, markets and competition actually focus on in the real world. Colander begins by noting that it is reasonable to start with assumption that profits are profit maximizers, however, in the real market it depends. Colander notes that if firms are profit maximizers they are much more concerned with long-run profits rather than short run profits. Thus, even if they can, they make not take full position of their monopolistic situation in order to strengthen their long-term position. An example the author provides is the liberal return policies that companies have. Similarly this means that many firms will spend capital on such expenditures on reputation and goodwill to increase long-run profits, even if their short-run profits are reduced. The second insight that Professor Colander provides to demonstrate how real-world firms change from the model is how the decision’s makers’ income is often a cost of the firm. Because, as the writer notes, production doesn’t take place in owner-operated businesses; large corporations have eight or nine levels of managements, thousands of stock-holders, and a board of directors. The inspection of the structure of a firm is important because, economic theory states that …show more content…
However, monitoring is costly and removes a firm’s profit. This is noted as the monitoring problem—the situation wherein employees may not have the best interest of the firm in mind. Professor Colander notes that companies often try to make a contract with managers wherein the incentives of both parties are made to correspond as closely as possible. The specific monitoring problem is that owners find it too costly to monitor managers to ensure that managers do what’s in the company’s best interest. And self-interested managers are interested in maximizing the firm’s profit only if the structure of the firm requires them to do
Chapter seven is very short,we go back to MacDonald Critchley who had gained a huge interest about the third person phenomenon and he believes it was a presence from within. John then goes on to chapter eight, he tells about stories where the victims of this presence were in a crisis of losing a loved one by any type of cause or they were almost going to lose them. John had noticed that in most of these situations, when there is a time of crisis the presence appears before them when they are losing their companions, even to those from chapter one through 6. John called this “the widow affect” which is the moment in which a presence of the third man would aid those with loneliness.
This book starts on March 5, 1973, Daly City, California. Most of the events in this book take place in the home of young David Pelzer. The book begins with David doing a chore his mother has assigned. Right away, you are shown just a bit of the abusive relationship between David and his mother. David is rushing to do the dishes because he knows if he does not complete this chore, he will have to take on the wrath of mother and be deprived of food. As soon as his mother enters the kitchen, his mother begins smacking David. At school, David is a outcast. He smells and wears the same torn up cloths because she does not allow him to clean himself. She gets pleasure out of humiliating him.
This company is known to be a monopolistically competitive, because there are still many firms and consumers, just as in perfect competition, but they still have control over what price they charge in their company, because Ben and Jerry's ice cream is differentiated from the other ice cream companies and they provide a lot of non price competition which will be mentioned later in the paper.
Through out his tenure at Sunbeam,Al Dunlap’s advocated profit by firing many employees and shutting down many factories.If we look at it in the short term ,this approach seems very attractive as it brings in quick short term gains.In the long term ,however, such a decision would not ensure the sustainability of the company. Profitability and responsibility can and should be combined in an ideal world, however it is clear that they are at least partially contradictory. Shareholder pressure should not force a company to make short-term decisions that might be detrimental to the long-term profitability of the company.
Companies compete every day, in the stock market and out. Rising stock prices, profit gains, and increasing capital growth force companies of similar character to increase their productivity and wealth as well. Computer companies are especially guilty of this competitiveness. Every time a new, faster computer chip is introduced, every company tries to better it. These kinds of revisions are essential for economic growth, and likewise do not have a noticeably negative effect on our society. Every day there seems to be a new 10-10 number that you can dial to save on long distance phone calls. I personally don’t understand it, but there is obviously a market for long distance phone bill savings. This kind of competition is simple and innocent, but is becoming confusing. Sporting events have become more popular, and respectively more competitive. Little League is probably one of the worst areas for competition- not coming from the players, but from the parents.
In many corporations, money (profit, capital, and revenue) is what motivates activities and decisions. One of the major goals of corporations, shareholders, and managers is to maximize profits (Brealey, Myers, & Marcus, 2015). Money plays a significant role in the success of a business. However, money can also play an equally significant role in a corporation’s decline and failure. Money can be a motivating factor for innovation and change or corruption and unethical behaviors.
Because there are few firms in an oligopoly industry, each firms output is a large share of the market. As a result, each firm's pricing and output decisions have a substantial effect on the profitability of other firms. In addition, when making decisions relating to price or output, each firm has to take into consideration the likely reaction of rival firms. Because of this interdependence, oligopoly firms engage in strategic behaviour. Strategic behaviour means when the best outcome of a firm is determined by the actions of other firms.
CEO compensation has been a heated debate for many years recently, and it can be argued that they are either overpaid or that there payment is justified by the amount of work they do and their performance. To answer the question about whether CEO compensation is justified it must be looked at by the utilitarian viewpoint where the good of many outweighs the good of one. It is true that many CEO’s are paid an exorbitant amount of money; however, their payment is justified by the amount of money that they bring back to the company and the shareholders. There are many factors that impact the pay that the CEO receives according to Shah et.al CEO compensation relies on more than just the performance of the CEO, there are a number of factors that play a rule in the compensation of the CEO including the fellow people who help govern the corporation (Board of Directors, Audit Committee), the size of the company, and the performance that the CEO accomplishes (2009). In this paper the focus will be on the performace aspect of the CEO.
In addition to that, the article will be evaluated and summarized for its ability to justify its arguments. The article in question is titled “Monopolies Don’t Give Us Nice Things” by Barry Ritholtz. It is a fascinating read to anyone who is interested in learning
Employees tend to view their only obligations is to increase their company’s profit as so
No single firm can influence market price in a competitive industry; therefore a firm’s demand curve is perfectly elastic and price equals marginal revenue. Short-run profit maximization by a competitive firm can be analyzed by comparing total revenue and total cost or applying marginal analysis. A firm maximizes its short-run profit by producing that output at which total revenue exceeds total cost by the greatest amount.
For this essay, I will evaluate the Employee Loyalty Argument derived from ‘Whistleblowing and Employee Loyalty’ by Ronald Duska. I will argue that this Employee Loyalty Argument is deductively valid but is not deductively sound because premise 2 is false. I will justify my claims that premise 2 is false by arguing about how it is rational for employees to expect their companies to recognize and fulfill a duty of loyalty to their employees if the employees also have a duty of loyalty to the companies that employ them.
In the short run, oligopolies are. able to earn abnormal profits, but in the long run as well they are. able to sustain abnormal profits due to the barriers to entry and exit. Then the s The barriers act as a strong deterrent to firms that want to come in. the industry and " eat into" the abnormal profits and then exit the market.
Firms with market power or monopolies are often seen as detrimental for customers and economic welfare. According to the neoclassical theory, the market power of monopolies and oligopolies is potentially higher than that of firms in monopolistic or perfect competition since they have to face very limited competition, if any (Ferguson and Ferguson 1994). In monopolistic or perfect competition can make supernormal profits in the short term but eventually other firms will enter the market and offer alternative products that reduce the demand for the established firm’s products (Sloman et al., 2013 p. 177). Dissimilarly, this is not the case for dominant firms or monopolies; the lack of competition allows them to set prices and make supernormal profits increasing the perception that big companies are “bad” for consumers. As shown by the graphs in Figure 1 and 2, there are substantial differences in the competitive and monopoly markets. In a competitive environment, the equilibrium is reached where demand meets supply. In a monopolistic market, thanks to the establishment of higher prices and the production of lower quantities, monopolies or dominant firms make supernormal profits; additionally, there is a deadweight loss and some consumers who were willing to pay lower prices wil...