Instructions: Respond to one of the following discussion prompts by applying what you've learned in the course (e.g., approach these prompts like an economist and use the concepts and tools learned). The OP should be 1-2 paragraphs.
Prompts:
- (Corn) Small corn farmers operate in a perfectly competitive market, and corn is a major input into ethanol production. The Energy Policy Act of 2005 mandated increased biofuels and raised ethanol subsidies (which all effectively raised corn demand). Consequently, estimated corn production from 2005 to 2010 rose 10% to 313 million metric tons and the average price rose to $6 per bushel (from a 2000 - 2010 average price $2.50 - $3.00 per bushel). Does the data support predictions based on the short-run competitive model? What would be expected to happen in the long-run according to the competitive model?
- (Textbook) Do you think UNM's bookstore has a monopoly on textbooks (use the characteristics of a monopoly)? How do you think the bookstore worked for previous generations (was it a monopoly then?). What changes in recent years have affected the UNM bookstore market?
- (Brand Name Drugs)Brand name drug producers have often paid generic drug producers in legal settlements to delay the introduction of a generic substitute. The Federal Trade Commission estimates that these "pay for delay" settlements were costing American consumers $3.5 billion annually as a result of the higher monopoly prices. As a result, the House of Representatives passed a bill in July 2010 seeking to limit the practice. Why would brand name drug producers be willing to pay generic drug producers? Who loses out from these "pay for delay" schemes? What would the effect be on equilibrium price and quantity if the generic producer enters the market?
- (Game Theory) Game theory is a mathematical way of understanding the strategic decisions of players and can be applied to a variety of situations. Go online and find a news article (it's OK if it's older) that discusses the use of game theory to understand a situation (doesn't have to be a business decision, can be anything). Summarize and share what you have found.