The paper “ Monopolistic Competition and Oligopoly, Market Failures and Government Policy” is a fascinating variant of the assignment on macro & microeconomics. The demand and spread of days on which many people come to watch cinemas dictate the different prices charged for movies. However, profit or revenue needs to be maintained or sustained. On Tuesday evenings, there are more people than on other days and the hall is full, thus demand so high as the price is lowered. On other days, demand reduces as prices charged fully. How will the consumers and firms benefit or lose from price discrimination? For consumers, they benefit from low prices at stages where the prices are charged lower on the same product.
However, some who lack the knowledge of separate prices lose. Firms on the other hand benefit from increased revenues, thus enabling a firm to sustain its sales and businesses. Some firms get the benefit of driving out of business their competitors (predatory pricing where the price is less than average cost). Task 2: Market Failures and Government PolicyDefine the terms public goods, private goods and merit goods with examples. Public good- A public good is a good or service that a consumer can take without reducing its availability to another consumer.
The government normally provides them free, and none is excluded from its consumption e. g. roads. Private goods- private good, the opposite of public good, is produced and purchased for consumption whereby its consumption by one consumer prevents other consumers from consuming the good or service, for instance food, etc. Merit good-merit goods are goods whose value goes beyond the forces of demand and supply. The government or the provider provides them free for the benefit of the entire society, especially by the government because they would be under-provided if left for private businesses.
Examples are free education, free vaccination, among others. Some roads can be regarded as public goods, others as private goods. Which type of roads can be provided by the market? Why? Is this a good idea?