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The Method of Production in the Water Supply Industry - Assignment Example

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The paper "The Method of Production in the Water Supply Industry " is an outstanding example of a micro and macroeconomic assignment. The water supply industry, when compared to the monopoly industry, can be found that the prices in the water supply industry sell at a low price, unlike the monopoly industry where products are sold exorbitantly since there are no competitions…
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Economics Institution Name Tutor Course Date Tutorial 7 Quiz 1. The technological changes which have occurred to the water supply industry entail the emergence of the Nanotechnology in filtration which ensures that water is purified before being supplied to be used in households. This technology enables the industry to remove microbes and bacteria from water before its being distributed. This has led to the reduction in waterborne diseases. Smart monitoring technology as well has emerged which ensures that the industry monitors the flow of water from its source of supply to a household with the ability to locate the water leakage within its route. This has been achieved by use of acoustic sensors. This has led to the saving of water leakages being witnessed. Quiz 2. The method of production in the Water supply industry is highly labor intensive since the capital which is required to setup as well as running costs are much higher than any other industries. This is also because the structure of the water supply industry mostly functions with assets and thus very important to invest in such capital assets. It has been found that the large amount of capital which has been invested will produce high returns. Water supply industry does operate in large scale since it serves the whole community (Andreff & szymanski, 2006). Quiz 3. In the water supply industry, the fixed costs which are incurred include the rental costs of the premises they operate from, the licenses and permit costs and the costs of the insurance premiums paid by the industry. The variable costs entail the commission which depends on the supplies made and the productions supplies cost which depends on as well supplies, wages for the employees. Quiz 4. For the water supply industry to increase its production in the short run, The number of the employees should be increased so that the rate of production will increase leading to overall production. Quiz 5. Since the short run marginal cost curve slopes as seen, it can be attributed to small quantities of output which then increases in production causing the curve to decline before it reaches a maximum value which then causes the curve to rise again. For the average total cost curve which is seen to be U-shaped, it is because as the small quantities are produced, the curve declines then as it increases, it also arises. The AVC curve as well U-shaped which goes down then goes up due to the costs of production changing until maximum production is reached. Quiz 6. If there is an increment in the demand for products by about fifty percent, then the output which will take the time to increase is the asset which is used to supply the water such as the pipe of the water. This is because it is costly. It can take approximately one month for such to be increased. Tutorial 8 Quiz 1. Economies of scale are very important to the water supplies as it adds to its efficiency of operation. Economies of scale available for the water supply industry is the high population which can increase the need for water as well as decrease the asset management fees per household which in turn lead to the increment in profit. Additionally, the utilization rate can as well lead to the reduction of the costs of capital leading to increasing in profits. Quiz 2. There are various diseconomies of scale in the water supply industry. This includes the high costs associated with geographical expansion which seeks to use a lot of company’s funds. Moreover, the costs of legacy costs which include the payment of pension to the retired employees. Quiz 3. When the curve is sloping downwards, it is deemed the output is increasing and the firm is thus experiencing the economies of scale. This goes on till the diseconomies of scale when the curve starts to rise. Thus, the cost rises. This implies as well that the business in the long run experiences some of the economies as well as economies of scale. Quiz 4. The water industry is not an absolutely competitive market since there are only a few firms in the industry. This is termed as an oligopoly. This as well because there are a lot of barriers to entry since the cost of setting up a firm in such an industry is very costly since a lot of assets are required before becoming active in the market. Unlike the perfectly competitive, everything in perfectly competitive is very expensive. Moreover, there are limited pricing which implies that the firms set too low prices as well as high output to more restrict new entities from entering into the market (Hall & Lieberman, 2010). Quiz 5. In a perfectly competitive industry, the prices are determined by the forces of the market which are termed as the forces of demand and supply. If the demands for the commodities are high, the supply will be very high as well. This then will lead the sellers to raise their prices of their commodities so that the products cannot get finished in the market. This lead the customers to reduce their demand which forces as well the withdraw some of the good in the market and reduce the price as well. It will reach a point where a demand will be equal to the commodity supplied at a certain price. Then the commodities will be sold at that price. Tutorial 9 Quiz 1. The firm in water supplies industry can incur the economic loss as well as economic profit in the short run. When the firm is experiencing low output, it incurs the economic loss which is encountered when the total costs are found to exceed the total revenue of the firm. As the production continues, the costs incurred become equal to the total revenue realized which implies the firm isn’t making any loss nor profit. In this scenario, the firm is said to be breakeven. The firm then continues to produce the revenue exceed the total cost where the firm realizes the economic profit. Quiz 2. A firm, in the long run, can make an economic loss and economic profit also when the productions entail the production in which the marginal revenues are greater than the marginal costs. This can lead to economic loss as well as profit being realized depending on the marginal revenue of the firm. Quiz 3. The availability of the water is the major factor which dictates the efficiency of the grains. By improving the water usage, the efficiency of the targeted growers and the agronomists will be improved. In this regards, by improving the water usage efficiency trough the projects which can be utilized by use of water, the efficiency of the grains will be achieved. Quiz 4. With regards to the needs to utilize the available water so that the grain growing efficiency can be achieved, the new firms which have the intention of entering into such industry are not so much desirable since it is perceived to be a difficult exercise. For a firm which is spending some of its funds in advertising will find it not desirable since it is deemed efficiency cannot be achieved. Consequently, for a firm spending a little amount to carry out its advertising trough the newspaper advert will find it desirable to enter into such industry as it will not have to spend a large amount of funds. The firms in this regards should be willing to spend a significant amount so that it can know what is to be done whi9ch will guarantee them to be efficient and successful in the industry. It is important that a firm has some funds which will enable them to carry out some research so that they can continue being efficient and thus become successful in the industry. Tutorial 10 Quiz 1 The water supply industry, when compared to the monopoly industry, can be found that the prices in the water supply industry sell at a low price, unlike the monopoly industry where products are sold exorbitantly since there are no competitions. Moreover, monopoly market has lots of barriers which are mainly attributed to technological trends and high capital requirement which can be seen to be same as the water supply industry (Mayer, 2010). Quiz 2. The Monopoly industry mainly considers the demand of their products before deciding on their prices. This implies that the production supply, as well as the combination price, will ensure that they make a good profit. The marginal cost will be ensured that it is much lower than the marginal revenue. Quiz 3. A Monopoly in the short run can realize losses when the average cost is found to be above the market price which causes them to incur such losses. When the marginal revenue will be equal to the marginal cost, there are still losses which are being made. The operation will continue till the revenue exceed the costs which the firm makes profit. 4. The Long run shows that the firm can make a loss when the production does not have reached its optimum value. This implies that when the firm will be inefficient, then loss can be incurred. Quiz 5. The economic efficiency with regards to the water supply and the perfect competition depicts that in term of allocation, both in the short and long run will find that the price will be equal to the marginal cost which ensures allocative efficiency is achieved. Additionally, in terms of productive efficiency, which is achieved as well in both cases when the equilibrium is supplied at the minimum average cost? Furthermore, dynamic efficiency is achieved in perfectly competitive when there are homogeneous products which are not the same with the water supply. Quiz 6. It is not desirable for the water supply new firms enter into such since it needs a lot of capital to enter into such industry. Firms spending significant funds to advertise is deemed fit since it will get the information necessary to operate. Funds spending small amount is not deemed to be necessary since it may not be able to carry out its advertising efficiently ad satisfactorily. The firms should have funds to spend significant research to be able to know the requirements and the cost of operating. Tutorial 11 Quiz 1. With regards to the monopolistic market and the water supply, the firms makes in depended decision which is like the water supply as they make their own prices. The firms included in this industry which are a monopolistic is the water supply though it oligopoly in its own. Quiz 2. Monopolistic firms decide their products prices by the forces which are driven by the competitors in the market. The prices in this regards will depend on the rivals which will tend to stabilize the prices charged. Quiz 3. The firm can make profit and loss when the marginal revenue differs from the marginal cost. In this, when the MC exceeds the MR, losses incurred. When MR exceeds the MC, profit is realized. 4. In the long run, the firm operating in the monopolistic competitive market will make profit when the marginal cost is less than the marginal revenue. Quiz 5. With regards to the efficiency of the cafe, the productive efficiency will be achieved when the marginal income will be equal to the marginal cost at a breakeven point. Regarding allocate efficiency, it can be deemed that the firms should allocate their resources to the projects which are profitable. Consequently the dynamic efficiency is achieved when the firm moves with the changes in technology. Quiz 6. It is desirable for the cafe and coffee shop to enter into the new industry so that they can maximize the profit by providing unique products. The coffee shop should use significant income to carry out advertisement so that it can attract a lot of customers. The spending of a small amount in the advertising should is used which will help in making the product to be known. The cafe should as will allocate some funds for research to help in improvement of the quality of their goods. The cafe should have funds to help in development so that it can be able provide what the customers wants. Quiz 7. For the oligopoly, large few firms are dominating the market, and the market stability is achieved since the prices are set to restrict the entry of the new entrants. The industries in this market are the supermarkets. References • ANDREFF, W., & SZYMANSKI, S. (2006). Handbook on the economics of sport. Cheltenham, UK, Edward Elgar. HALL, R. E., & LIEBERMAN, M. (2010). Economics: principles & applications. Mason, OH, South-Western Cengage Learning. MAYER, D. A. (2010). The everything economics book: from theory to practice, your complete guide to understanding economics today. Avon, Mass, Adams Media. Read More
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