Question

I need both annswer and Please make a diagram of Tutorial 9 week 10 in msword not in a paper . Thanks

Tutorial 5/6 Week 6/7 Question 3 (7 marks) Describe and compare the level of price control within the four market structures (4 marks). Identify the market structure/s where a firm can be a price-maker (1 mark). If the firm is a price-maker, then the company will always be profitable. Explain why you agree or disagree with this statement (2 marks). Page 3 of 3 Tutorial 9 Week 10 Question 2 (7 marks) Cite and discuss the phases of a full business cycle with respect to GDP (3.5 marks) and unemployment (3.5 marks).

Answer 1

3) Price control under the four market structures are:

i) Perfect Competition- under perfect competition market price is determined by the intersection of market demand and market supply. Here individual firms do not have any influence on the market price. Once the market price has been determined by market supply and demand forces, individual firms becomes price takers.

ii) Monopoly- they are the sole producer of a product, therefore it can exercise considerable influnce on the market supply of the commodity. Price of the commodity is fully under the control of the monopolist. Monopoly represents the most market power, so they are called price taker.

iii) Monopolistic Competition- a firm under monopolist competition can follow an independent price policy. It can influnce the price of thecommodity to some extent. It means that a firm unedr monopolistic competition is the price-maker of the product.

iv) Oligopoly- firms in this industry takes into consideration the reaction of the rival firm in the formulation of price policy. Therefore they are the price setters or price makers.

Firms can be price maker under:

Monopoly, Monopolistic Competition and Oligopoly

If the firm is a price-maker then the company will always be profitable. Yes, I agree because price makers are profitable because it will increase its output only as long as its marginal revenue is greater than its marginal cost . In other words, as long as it is producing a profit.

2) Business cycle refers to economy-wide fluctuations in production, trade and general economic activity. From a conceptual perspective, the business cycle is the upward and downward movements of levels of GDP and refers to the period of expansions and contractions in the level of economic activities around a lonf term growth.

Business cycle are identified as having four distinct phrases: expansion, peak, contraction and trough.

An expansion is increasing emplyoment, economic growth, and upward pressure on prices. A peak is the highest point of the bussiness cycle, when the economy is producing at maximum allowable output, employment is at or above full employment and inflationary pressures on prices are evident. Following a peak, the economy typically enters into a correction which is characerized by a contractuion where growth slows, employment declines, and pricing pressure subside. The slowing ceases at the trough and at this point the economy has hit a bottom from which the next phase of expansion and contraction will emerge.

The four phases of the business cycle:

1. A peak is when business activity reaches a temporary maximum; unemployment is low, inflation high.

2. A recession is a decline in total output, unemployment rises and inflation falls.

3. The trough is the bottom of the recession period, unemployment is at its highest, and inflation is low.

4. Expansion (recovery) is when output is increasing, unemployment begins to fall and later inflation begins to rise.

Unemployment increases during business cycle recessions and decreases during business cycle expansions (recoveries). Inflation decreases during recessions and increases during expansions (recoveries).

peak LEVEL OF REAL OUTPUT peak trend peak expansion growth recessio n trough expansion trough recession TIME