Economic_Market_Structures

Differentiating Between Market Structures Sally Hansen ECO/212 February 2, 2011 Differentiating Between Market Structures When studying markets in an economy, there are many aspects that come into play. For example, there are different types of goods, resources, and even different types of markets within an economy. A dynamic relationship exists between supply and demand, which affects jobs, wages, and applicant qualifications. After presenting a basic understanding, these concepts will be explained through the lens of the United States military. A public good is nonrivalrous and nonexcludable (Hubbard, & O'Brien, 2010). When one person or group consumes public goods, the amount available to all others is not diminished. No one person or group can be stopped from consuming available public goods. An example is the protection provided by municipal agencies such as the protection by police and fire departments. Nonrivalrous means that one person’s consumption of the good does not take away from another person’s consumption of the good. An example of a nonrivalrous good is an uncongested park because there is no competition for the use of it. Nonexcludable means that it is not possible to prevent a person from consuming the good. A good example of a nonexcludable good is a baseball stadium that has a fireworks show. Although only some paid for the show it is impossible to stop others outside the stadium from seeing the show. Private goods are both rivalrous and excludable. If I eat an orange; there is one less orange for you to eat. An orange fits the criteria for a private good because it is both rivalrous and excludable. Unlike public goods private goods can be consumed by only one person and then is unavailable for all others. A common resource is non-excludable but often is rivalrous. Examples of common resources are natural resources such as clean air, clean water, public lands, and fish in their natural habitat. Everyone has the privilege to use these goods making them non-excludable. Often there is competition for the use of common resources leading to their overuse. A natural monopoly is a situation that occurs when there are large initial fixed (startup) costs and continual decreasing average costs over the range of production. Because of the initial investment, or startup costs, the government allows one firm to provide the service for a large geographic area. Bell Telephone enjoyed a monopoly in the United States for almost a century (Zahniser, 2000). This monopoly was allowed to let Bell recoup their enormous setup costs of buildings, poles, and purchased right-of-ways. After the investment of the setup costs the cost of serving each additional customer was minimal. This is in opposition to current wireless networks where startup costs are much less. Labor markets are strong and healthy when supply and demand for labor are both high, in turn labor markets are weak when both supply and demand are weak. Labor market equilibrium occurs when the open jobs in the market equal the number of people applying and looking for jobs; during these times pay or wages remain the same and everyone who wants a job has a job. According to Economic expert (2011), “In economics, if a market for a product has attained the price where the amount supplied of a certain product equals the quantity demanded then it has cleared.” During times of low supply, such as low numbers of people looking for jobs, wages can increase, as employers are willing to pay more for workers. Skill sets, training, and schooling affect the wages a person earn often increasing income with higher levels of each during times of high demand. Low supply can create a high demand of staff hired from employment agencies; although there may be a low supply of applicants. Highly qualified applicants looking for a raise or a new position are a group of employees who benefit during this period of low supply. When demand for jobs is low, wages can decrease, as many workers have experienced in the current recession. Layoffs occur during these times and many people opt in for early retirement options if they are of age and early retirement is available to them. Some companies opt to freeze or reduce wages in an attempt to save money and not lay off workers. During times when labor markets are weak websites are available that give the expected job hunter tools to help determine if the pay for a job is compatible with the applicant’s demands. Networking websites such as LinkedIn and Monster.com offer applicants current local area job information as well as sites that can help the applicant with career advice and resume assistance. Websites also offer re-training ideas such as school advertisements to assist the unemployed become qualified for a new career or enhance the career they currently have. The military is an organization not often thought of as a market but, in fact it is. The military is made up of four primary branches: Army, Air Force, Navy, and Marines. Each branch of the armed forces is a monopoly and each branch is under the direction of the department of defense that is also a monopoly. These four branches of the armed forces meet the criteria of a monopoly in a number of ways. One way the armed forces meet the criteria is that the government would block any private companies from entering in competition with the services they provide. The government also controls the key resources in entering the market in the form of tax dollars. Economies of scale are also a factor in the armed forces being a monopoly with the vast amounts of equipment, secretive technology, and intelligence it would require to compete with the current structure of the armed forces. History has confirmed that a unified front is the most effective approach when defending a nation. These four branches have the responsibility of finding qualified individuals who can fill vacancies that exist throughout their corresponding organizations. Even though the military has had specific recruiting goals that they have had to reach every year, they normally not only reach their goals but also exceed them. In 2009, all four of the branches reached at least 100% of their goal (Powers, 2009). The supply and demand situation created by economic conditions determines how hard it is to reach that goal. Recruiters have an extremely difficult task because they have to find a way to sell the military to individuals to achieve the recruitment goals given by the Department of Defense. There is difficulty in convincing someone to leave a good job or a situation in which work is optional because parents have good jobs. Although the military goals for recruiting set by the Department of Defense were being met prior to the 2007 recession, recruiters were working extremely long hours to make this happen. Pressure was put on all these recruiters to find qualified people to join the military. Since the economic recession that started in 2007 pure recruiting statistics do not tell the whole recruiting story because although the numbers are about the same each year, the quality of life for the military recruiter has changed dramatically. Recruiters, who used to work long hours because demand was greater than supply are now able to work from nine to five Monday through Friday. Instead of going out to look for people to join, recruiters wait in their offices for potential recruits to come to them. The recruiter only needs to determine whether the people coming in are qualified for a position because supply is greater than demand. The economic downturn and lack of other available jobs has made the market for military positions more competitive. The United States military is just one example of a market that is affected by the supply and demand of limited resources. As the differences between public goods, private goods, common resources, and natural monopolies were expounded upon and examples provided, some of numerous aspects that interact with in every market structure were brought to light. References EconomicExpert.com (2011). Economic expert. Retrieved on January 21, 2011 from http://www.economicexpert.com/a/Economic:equilibrium.htm Hubbard, R. O’Brien, A. (2010). Economics (3rd ed.). Boston, MA: Pearson Hall. Powers, R. (2009, November 14) Fiscal Year 2010 Military Recruiting Statistics. Retrieved January 21, 2011 from http://usmilitary.about.com/od/2010recruiting/a/october.htm Zahniser, R. (2000). The bell telephone monopoly vs. blt. Retrieved January 22, 2011 from http://www.belizenorth.com/bell_telephone.htm Written Assignment Grading Form Differentiating Between Market Structures Table and Paper Content and Organization  (7 points) | Points Earned: | Comments: |   | 10 |  The table and paper meet well the requirements of the assignment. The table was filled appropriately. Excellent example of an organization – good job covering all of the key elements. | All key elements of the assignment are covered in a substantive way. * A table is prepared which describes the characteristics of competitive markets, monopolies, oligopolies, and monopolistic competition. The table follows the format and row/column headings as shown in the syllabus. * Students have compared and contrasted public goods, private goods, common resources, and natural monopolies. * Students have explained how labor market equilibrium is affected by the supply and demand of labor. * Students have selected an organization with which they are familiar and identified the market structure of that organization and evaluated the effectiveness of this structure for the organization. * Students have summarized the factors that affect labor supply and demand for the selected organization. | | | The content is comprehensive, accurate, and/or persuasive. | | | The paper links theory to relevant examples of current experience and industry practice and uses the vocabulary of the theory correctly. | | | Major points are stated clearly; are supported by specific details, examples, or analysis; and are organized logically.  | | | The introduction provides sufficient background on the topic and previews major points. | | | The conclusion is logical, flows from the body of the paper, and reviews the major points. | | |   | | | Readability and Style  1.5 points | Points Earned | Comments:  |   |  1.5 |  The paper meets the requirements for readability and style. The writing is clear and logical. | Paragraph transitions are present and logical and maintain the flow throughout the paper. (only applies to the paper) | | | The tone is appropriate to the content and assignment. | | | Sentences are complete, clear, and concise. | | | Sentences are well-constructed, with consistently strong, varied sentences. | | | Sentence transitions are present and maintain the flow of thought. (only applies to the paper) | | |   | | | Mechanics 1.5 points | Points Earned | Comments:  |   |  1.5 |  The paper and table formatting is great and meets the requirements per the APA guidelines. | The paper, including the title page, reference page, tables, and appendices, follow APA guidelines for format.(only applies to the paper) | | | Citations of original works within the body of the paper follow APA guidelines. | | | The paper is laid out with effective use of headings, font styles, and white space. (only applies to the paper) | | | Rules of grammar, usage, and punctuation are followed. | | | Spelling is correct. | | |   | | | Total 10 Points | Points Earned | Comments: | Team A, great job on this assignment. Most of the examples are excellent and relevant to the specific types of industry discussed. Overall, your paper and table cover the main parts of the assignment very well. Your choice of an organization, the Armed Forces, was appropriate and the analysis was well-developed. Good job. | 10 |   |