Microeconomics Essay Example | Topics and Well Written Essays - 750 words - 1

Microeconomics - Essay ExampleAnother major restriction impede a pisseds entry into a new securities industry place is the raising of sufficient capital to buy necessary products or technology. While this barrier is clearly industry specific, it can surface in terms of financing to buy the business itself, or in start-up costs that are necessary to buy machines, technology, or patents that will permit full organizational operation. Another barrier is the constitution of predatory pricing. This functions when the established truehearted is able to sell products for prices wherein they take a loss for a period of time as a means of putting the competing blotto out of business. Another major barrier for entry in a market is the constitution of exclusive relationships with suppliers. In these instance, the established firm is able to sign deals wherein the supplier is only able to sell products to the established firm in-effect making it impossible for new firms to enter the ma rket 2. The demand curve for a purely monopolistic firm differs from the demand curve for competitive firm in significant ways (Krugman 2005). One of the important concepts to recognize in these regards is the nature of market power. Market power is understood as the ability of a business or firm to raise prices above the marginal cost level and relieve retain customers. In firms experiencing a purely competitive market environment, the market power is non-existent. In these situations, then, the demand curve for purely competitive firms is a horizontal line. This reflects the nature of market prices as static due to market conditions of pure competition that ensure the market prices dont rise about the level of marginal costs. Conversely, the demand curve for a firm in a market experiencing pure monopoly is entirely different. In a purely monopolistic market the firm experiences no competition from outside firms. In these regards, the nature of the market is not based on supply an d demand, but is constituted by the monopoly itself. In these situations, the firm has close to complete power yet, the firm is still bounded by the price consumers are willing to pay for the product. In pure monopolistic situations, the demand curve is the exact equivalent of the price the firm establishes. This is because consumer demand will decrease with the increased price, yet it is entirely determined by this element, as there are no outside competitive factors. 3. When considering the nature of productive efficiencies and allocative efficiencies, its clear that there are a number of notable differences (Productive vs Allocative Efficiency). In firms or markets that promote productive susceptibility measures, the major goal is to produce goods or services for the lowest cost that is possible. In achieving optimal productive energy the firm is implementing all of its inputs and workforce to supreme efficiency measures as a means of driving down product prices to the lowest possible level. Productive efficiency is differentiated from allocative efficiency. Allocative efficiency is concerned with the apportionment of resources throughout society. Allocative efficiency recognizes that not all goods that are produced can be utilized by society, so that in overproducing goods can negatively affect efficiency levels. The primary difference between these types of efficiency then is the nature of the end goal with