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. Moreover, the monopoly market has lots of barriers which are mainly attributed to technological trends and high capital requirements which can be seen to be the same as the water supply industry (Mayer, 2010). Quiz 2.
The Monopoly industry mainly considers the demand for their products before deciding on their prices. This implies that the production supply, as well as the combined 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 that are being made.
The operation will continue until the revenue exceeds the costs in which the firm makes a 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 the loss can be incurred. Quiz 5. The economic efficiency with regards to the water supply and the perfect competition depicts that in terms 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 that are not the same as the water supply.
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.