Graded Assignment Practice: Stiff Competition Oligopolies exist in many familiar places. Here is a list of some oligopolistic industries: • Automobile industry • Diamond industry • Airline industry • Aircraft manufacturing industry • Steel industry • Cereal industry • Oil industry • Photographic equipment industry • Telecommunications industry • Media industry 1. Choose an oligopolistic industry from the list provided. List at least three companies in this industry. (5 points) 2. What types of products do these companies sell? (5 points) 3. How many major companies are in the industry, and what percentage of the market do these companies control? (5 points) 4. Why do you think this industry is characterized by an oligopolistic market structure instead of another market structure, such as monopolistic competition? (5 points) 5. What types of incentives are effective in attracting customers to buy the industry’s product(s)? (5 points) 6. What are the barriers to entry into this industry? (5 points) 1. Describe the role that workers play in the game of economics. (2 points) 2. Explain why the worker’s role is unique. (3 points) 3. Explain why it is important for producers to conduct market research. (2 points) 4. Give at least one example of a type of market research that producers conduct. Explain the kind of information this research provides. (3 points) 5. Describe what utility measures, and explain why it is different from one consumer to another. (3 points) 6. Explain why utility is a useful tool for understanding consumer behavior. (2 points) 7. List two characteristics of an oligopolistic industry. (2 points) 8. Why are so many familiar industries oligopolies? (3 points) 9. Explain why circulation and ratings systems determine how much money different advertisements cost to run. (5 points) 1. Name something you have purchased in the past year. Describe in as much detail as possible how much this good or service increased your utility. (5 points) 2. Does the principle of decreasing marginal utility apply to this good or service? Have you reached the point of noticing the decreasing marginal utility? Explain. (5 points) 3. Describe a situation in which your budget was constrained. How would your purchasing decisions have been affected if you had had a higher budget? (5 points) 4. List two inferior goods that you use regularly, and describe why they are inferior. What normal goods could substitute for these inferior goods? What would it take for you to switch to using these normal goods? (5 points) 5. Describe something that you think is a public good. Explain how it is non-excludable and non-rival. State whether you think the good should be provided by the government or by private industry, and explain the reasoning behind your position. (10 points) 1. Calculate the hourly wage associated with the two annual income levels listed below. Assume that an individual works 40 hours per week for 50 weeks each year. (5 points) Annual income Hourly wage 2005 U.S. federal poverty line for a family of four $19,350 2005 U.S. median household income $46,326 2. For each of the professions in the left column, calculate the annual pay based on full-time, year-round employment consisting of 2,000 hours a year (40 hours per week for 50 weeks each year). Record your calculations under “Annual income” in the table. Then, find the difference between each annual wage figure between both the poverty threshold and the median household income. If the difference is a negative number, record it as such. (15 points) Hourly wage Annual income Difference between annual wage and federal poverty line Difference between annual wage and median household income Federal minimum wage $5.15 Oregon’s minimum wage $7.50 Average for all occupations $18.21 Marketing managers $49.03 Family practice doctors $67.50 Veterinary assistants $9.90 Police officers $22.73 Child care workers $8.73 Restaurant cooks $9.54 Air traffic controllers $50.88 Data source: U.S. Bureau of Labor Statistics 3. Choose a profession for which the annual income is higher than the U.S. median household income. Why might this job pay more than the median? How could productivity, the law of supply and demand, and international competition and technology affect wages for this job? (5 points) 4. Choose a profession for which the annual income is lower than the U.S. federal poverty line. Why might this job pay less than the poverty line? How could productivity, the law of supply and demand, and international competition and technology affect wages for this job? (5 points) 1. Describe the effect each action below will have on the money supply. Explain your reasoning. A. The Fed raises the discount rate from 5% to 10%. (5 points) B. The required reserve ratio is lowered from 20% to 10%. (5 points) C. The Fed sells $5 billion worth of T-bonds on the open market. (5 points) D. The Fed buys $5 billion worth of T-bonds on the open market. (5 points) E. Banks decide to keep more of their assets as reserves in order to avoid risking a shortage of the required reserve. (5 points) 2. How does expansionary monetary policy promote economic growth in the economy? (5 points)