Government and Business Paper: Chapter 27 Problems 2, 3, 5, 8, 9, and 15 on pp. 630-631

Government and Business Paper: Chapter 27 Problems 2, 3, 5, 8, 9, and 15 on pp. 630-631

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ECON 607, Managerial Economics

(2008). Economics 7th ed

Government and Business Paper

Chapter 27 Problems 2, 3, 5, 8, 9, and 15 on pp. 630-631

Chapter 27 Exercise 2.
Using the demand and cost curves of an individual firm in oligopoly, demonstrate what the effects of each of the following are:

a. The Clean Air Act.
According to Boyes and Melvin (2008, p. 594), an oligopoly is a market structure characterized by (1) few firms, (2) either standardized or differentiated products, and (3) difficult entry. The difficult entry is typically the result of economy of scale, actions on the part of the firm, or governmentally created barriers. Although a particular firm may dominate the industry, it is not the sole providers of the good or service. Therefore, there is certain interdependence among oligopolies. This interdependence causes firms to take into account the action of their competitors before they make advertising and promotional decisions, since the actions of their competitors has a tremendous impact on the results.
Since the Clean Air Act is a regulation and will have to be implemented to stay in business, the individual firms might only be interested in how their competition intends to meet the requirement.
Regulation such as the Clean Air Act requires a firm to invest in capital and other resources to meet the standard. As they purchase such items, it costs the firm more to produce its goods and services. As a result, their average total cost, as well as their marginal costs increase, causing an upward shift in both of these curves. Since the firm will produce where marginal revenue is equal to marginal cost, the firm will supply less at an increase cost, causing the supply curve to sh...

... middle of paper ...

...can be stolen, as copyright law becomes increasing less efficient. If peer to peer sharing (P2P) takes place, the firm looses out on the price of that copy and may not be able to receive enough profits to compensate it for its huge development costs.

Boyes, William & Melvin, Michael, (2008). Economics. 7th ed., Boston: Houghton-Mifflin Company.
U.S. Department of Health and Human Services, Food and Drug Administration (2008, April) FDA Newsletter. Retrieved October 26, 2008 from
World Intellectual Properties Organization (2008) World Intellectual Properties Handbook Chapter 1
pp. 3. Retrieved October 26, 2009 from

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