If you need environmental economic facts for your next analytical paper, consider the ten facts below:
- Perfect competition in an environmental economic is a market structure wherein five basic components are met. The first component is when all firms sell an identical product. Once this has been established, the second criterion is that all firms are price takers. Third: all firms have a relatively small market share. The fourth component is that buyers know the nature of the product which is being sold along with the prices charged by each of the firms. The last item is that the industry is then characterized by freedom of entry and exit. It is a theoretical market structure which is used comparatively as a benchmark to compare other market structures.
- In a given environmental economic marketplace there are different buyers and different sellers, which create a competitive market. The market changes based upon responses to supply and demand. With numerous buyers and sellers, the supplier and the consumer have an ability to influence the price. When there exists an industry without any substitute products there can be no competition and the producer of the product can control the price, limiting the consumer’s choice and influence over the price.
- An environmental economic monopoly encompasses the market structure established above wherein there is only one producer for a specific product making the single business the entire industry. Because of high costs, entrance into the monopoly structure is restricted. The impediments, aside from cost, can be social, political, or economic. A monopoly structure may also form because of a copyright or patent which one company has preventing other companies from entering into that market.
- An environmental economic oligopoly consists of only a few firms making up a single industry, however, the firms are part of a selected group which maintains control over the price. Often the products produced by each firm are almost mirrors of one another. Each competing for market share and being a result of market forces.
- In the United States, the closest example of perfect competition for environmental economics would be the stock exchange. Since perfect competition is a theory, no example will fit the five parts of the model perfectly, however, the stock exchange is close. The only thing lacking from the example of the stock exchange is that no single seller is able to influence the market price, and investment banks are actually capable of influencing the market.
- A monopoly is one extreme form of market structure while perfect competition is the exact opposite of a monopoly.
- There are two types of price discrimination for environmental economics. The first is single-price monopoly which is when a firm is limited to charging the same price for each unit of output sold. The second type is price discrimination monopoly. This is when there are different prices charged to different customers based upon their willingness to pay for the goods in question. The latter form of price discrimination within a monopoly is not based on prejudice, stereotypes, or any type of ill-will toward a group or a person. Price discrimination requires a demand curve which must be a downward-sloping demand curve for the firm’s output. The firm must be able to identify consumers willing to pay more and must be able to prevent low-price customers from reselling to high-price customers. An environmental economic monopoly benefits from price discrimination because it always benefits owners of a firm, increasing its profit. However, it does harm some customers and additional profit for the firm is equal to monetary loss of customers.
- Perfect price discrimination needs each firm to charge each customer the most the customer would be willing to pay for each unit he or she buys. A monopolist can practice price discrimination assuming two conditions are met. The first is that there must be a different price elasticity of demand from each group of consumers, so that the monopolist is able to increase the total revenue and profits. The other condition which must be met is that the monopolist must be able to prevent any ability of customers to purchase the product or service at a lower price, ultimately preventing them from switching to another supplier. An example of price discrimination by an environmental economic monopoly is demonstrated through top hotels or airlines who offer spare rooms and seats on standby. This takes a normally fixed cost industry and offloads spare capacity at the last minute with supplementary profit. Also, early bird discounts function in this industry in the same manner. Offering early bird prices allows airlines and hotels the ability to foresee their source of cash flow weeks in advance. While this pricing strategy is referred to as yield management, it is still price discrimination.
- Peak and off-peak pricing for AT&T as well as PG&E in the California region separates markets by time. Off peak times offer spare capacity and low marginal costs of production as opposed to peak times where the supplier reaches their capacity constraints. AT&T was a government-supported monopoly. However, AT&T made the electric industry more efficient and despite having peak hours, they were not guilty of price discrimination. They however, had the potential to fix prices.
- Microsoft was an abusive environmental economic monopoly, not sharing any of the positive qualities that AT&T was able to boast. Microsoft’s operating systems continued to demonstrate hostility toward competitor’s software. They abused a non-coercive monopoly. Microsoft was unable to dominate the market indefinitely because their materials were produced at such a rapid pace that bugs were still present and innovative domestic and international competition ruined their initial monopoly. Microsoft lost their hold on open source software.
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