MariettaEcon

Microsoft and Monopoly

2008-08-01T20:45:00.002-05:00

Microsoft and Monopoly
Microsoft is the most famous company in the world, everyday everyone can see it products everywhere, and where is very less other's company's product can effect Mocrosoft's market share. so the situation caused anti-monolopy to microsoft. but I think it is unfair situation, because microsoft's products are perfect and useful, and other company's products cannot compete with microsoft. And it is not a black market, I think at the same to said anti-monopoly to microsoft we should foucs on other company and give them some support to help them make a good product to compete with microsoft, thur the market will became a competive market.
http://www.zaimoni.com/George/MicrosoftMonopoly.htm

The Black Market and the Oil Price in China

2008-08-01T20:29:00.001-05:00

The Black Market and the Oil Price in China
The Chinese government set a price ceiling of gasoline, but the price which was set by Chinese government is lower than cost price. Because of this situation, the petroleum companies decrease the supply, but the price still at that price, therefore, many car and track cannot get gasoline. Now, there is a black market appeared, some people see that situation, and thought it was a chance to make money. First, they went to a gasoline station to buy much gasoline, than when the station run out of oil, they bring the gasoline that they brought before and sell the gasoline the station or drivers at a much higher price.
The government had to free the price of gasoline; it is the most effective way to solve the problem. Because if the oil companies can sell the oil at a higher price and get more benefit, they will produce more oil, so the people who buy and sell gasoline illegal does not have any benefit, and the situation will be stopped.

Pollution and Airline Code share

2008-08-01T20:27:00.002-05:00

Pollution and Airline Code share
As we know, the airplanes make a big air pollutions, there are so many flights in the air and pollute the air. But there is a strange situation, the seats in plane is hard to be taken fully in every flights, and some airlines have the same lines, so there are many planes in the air, and there are not fully being taken by passengers. So the code share can reduce the air pollution, and decrease the cost of each airline, and they can get more benefit and do not need more pollution permits.
For example, I took the flight CA982 from New York to Beijing, at the same time the flight is UA4451, even this the plane was not full, imagine if there are planes to fly this line, there will be more most of Air China and United, and there will be more air pollution.

Market Share in Our Life

2008-08-01T20:27:00.001-05:00

Market Share in Our Life
In our daily life, there are many famous brands around us, and in a same field, there are also few famous brands, they have the market share almost equally, because of this situation, I believe the market share offer a variable choice to our life, if there are more pieces of market share. And the variable choice offer many chance to save many, at the same time we can get more goods.
For example, in Marietta there are several pharmacies, if I want to buy a bulb, I will to go to each pharmacy, and try to find the cheapest one. Another reason is that there is a competition between each pharmacy, so the price of goods will be fine and cheap. There are more pharmacies means there are more goods to sell. Because each pharmacy is different, each one has its feature, so they can offer different goods and we can buy more goods than there is less pharmacy.

Grain from Trade and International Trade Competition

2008-08-01T20:26:00.000-05:00

Grain from Trade and International Trade Competition
The gain from trade means people can get more benefit than do a job or a produce alone. But, there is a issue between countries, all the countries want to get the most benefit through trade with other countries, in the other side, all the countries afraid more countries are stronger than themselves, and all the countries also want to restrict the trade of other countries. So the big countries always make trade with same countries which are have many sources and need the protection of big countries. For example, China like to trade with African country, China sells many kinds of goods and weapons, and get many sources from those countries. In the United Nations, the trade between China and African Country can let they help each others, like China can get ballot from African countries, and China also can protect the benefit of African countries.

Chinese Style Price Discrimination

2008-08-01T20:24:00.001-05:00

Chinese style price discrimination
There is unique price discrimination in China. In many Chinese shopping malls, before you go shopping there, you have to learn how to make discount positively by yourself, because in there shopping malls, the sellers would not tell you the true price of the good and the original price which they said is much higher.
the price you buy the goods is depend on your skill to make discount, if you have a better skill and experience than other’s, you can get the same good at a lower price, so it is a different kind price discrimination.
How to avoid this discrimination? There is most useful way, it’s that you must have your willingness to pay, and you insist the price that you can accept of a good.
For example, in Silk Street which is a famous shopping mall in Beijing, and in the mall you have to make discount to every goods, if not the discrimination are happen on you.

XM and Sirius settle $19 million radio violation

2008-07-31T23:45:00.000-05:00

XM and Sirius satellite radio are the only two competitors in their industry. However, in 2007 they filed for a merger that would create a monopoly for satellite radio. The justice department approved the merger claming that there would be enough competition from conventional radio, mp3 players, and ipods to stop the joint company from skyrocketing prices. On the other hand, the FCC has been more difficult to convince. When they originally wrote the contracts for the wave licenses, they were to be kept separate. The two companies are willing however to work with the government, and obey certain rules such as keeping prices static for three years.

Powerful Externalities of a Giant Natural Monopoly in a Free Market

2008-07-31T20:23:00.000-05:00

Today on the abc World News Tonight with Charles Gibson announced that Exxon Oil has announced the largest quarterly profits of any corporation ever - 11.7 billion dollars. Shell Oil followed with 11.5 billion for the quarter. Hearing that news none of us would wonder where that profit came from - we paid for every penny at the pumps. However, as the commentator explained, Exxon made its profit long before the oil was even refined into gasoline. They made it by raising the cost of the crude oil.

Exxon and other oil drilling companies are part of a small competitive monopoly that sets the prices and to a large degree controls the markets of many other goods and manufacturing. The commentary explained that oil production in the Middle East had slowed after the US invasion of Iraq (It is just getting back and increasing now.) The decrease in production by one supplier began the manipulation of the market by the other monopoly participants. By slowing oil production or as the commentary described by conducting repairs on oil drilling or broadcasting concerns that oil production may be curtailed because of the continued aftermath of major storms in the Gulf of Mexico, the consuming countries were willing to pay a premium price on oil to assure their supply.

The oil drilling market is not easily entered. Many oil rich lands are off limits to new and old companies because of governmental and political restrictions (e.g., in Russia and Venezuela), because of conservation concerns (in the coastal waters and in Alaska) and because of natural barriers (e.g., drilling by the North Pole although there is already interest by oil companies in the sea beneath the melting northern icecap). Therefore the monopolist oil companies have been able to set the price and get what they ask.

But there is another side to the story. The news commentary described what happened during the oil crisis in the 1970's when President Carter urged all Americans to conserve energy. For a while Americans bought smaller cars and turned down the heat. But the oil crisis did not last long and soon we all went back to consuming the cheap supply of energy. This time is different. There is no expectation that the oil crisis will end soon. The longer the prices stay high the more lasting the effects. Americans are already driving less, taking more public transportation, working at home for some days per week, buying “green” and seeking products and designs that conserve energy. These changes are not temporary because they are effecting a shift in production and industry. One example is the Toyota factory that had opened in Louisiana and was prepared to make trucks has now retooled to make hybrids. American auto manufacturers have done the same. So that were the energy crisis to end in the next few months, the shift that has taken place would not simply return to the old ways. Economists call this demand destruction, in which changes in the economy creates a shift in consumer behavior that destroys interest in old products. The process is a natural phenomenon in the technology industry in which new devices quickly make old ideas obsolete. With the oil crisis, the destruction of demand has made “going green” the new chic.

Coase Theorem at Work in a College Town

2008-07-31T20:22:00.000-05:00

The Coase Theorem states that a free economy will find private solutions to difficult economic conflicts. This article appeared a few years ago but what it describes is happening right now in New Haven, Connecticut where I live. The activity is an example of a creative solution to a complicated problem - without government interventions. The article describes a variation on car-rentals; charges by the hour especially in big cities or near airports and business centers.

What is happening in New Haven, the city where Yale University is, involves the growing problem of traffic congestion and scarce parking places. The university had banned student cars from university lots, especially after new construction took up several parking lots. Students and their parents of course complain. And city businesses miss out because the carless students do not buy big items because they cannot carry them to their dorms. However, the city was not interested in subsidizing student parking even though the university is a big part of the economy. The city also has a shortage of parking spaces and students would be leaving cars unused for long periods of time in parking spaces needed for consumers of city businesses.

A few enterprising students formed a business “Pick-Ride-Drop” nicknamed PaRDEE. The idea is that the business makes a few cars available to students to rent for an hour or more to shop or get to the train station. They are charged by the hour and an extra fee if they do not bring the car back to the same lot where they picked it up. There are drop off places at ten spots around the city, including the train station, the grocery stores and shopping district, the medical center, and several business centers. The students call ahead to reserve a car at a pickup place and then drop it off with the keys in a special pouch for the next driver. The business began with 10 cars and now there is a group of 39. The market has opened to employees of the university and several allied businesses.

The Coases theory is evident in the following. The business would not have worked if the owners had to pay the exorbitant parking and the students would not have purchased the cars if the parking costs had been passed down so Yale designated a number of spots just for the cars in exchange for happier students and parents. The city also agreed to waive the street parking meters for those cars in exchange for more reasonable numbers of student cars. The students have to plan ahead but for very reasonable rates get to have car transportation when needed. The fees go to car repair and gas. As gas prices increased the rates have also climbed but are still acceptable.

The most recent development is the addition of a bicycle fleet operating on the same principle for those who are thinking green. In a recent local paper article one of the owners commented that the shared rides and cars is a practice that is more common in Europe but workable in the American city. The organization is planned as an excludable and rivable product, making a private business.

Slew of Bankruptcies Shock the country

2008-07-31T15:26:00.002-05:00

Very few times in our countries history have we seen so many companies file for bankruptcy. This article lists around 10 different well known companies that have filed or are going to file for bankruptcy. One that I found shocking was a retail store called Mervyns. Never heard of it? I do not blame you. However if you ever lived in California you would be quite shocked and upset. Mervyns is the same thing as a JC Pennies...but a little bit nicer. Every Californian is very familiar with this store. In fact when I lived in California my father used to manage a store where we lived.

The point that I am getting at is that we are now being surrounded by mainstay stores and restaurants that are closing. I wonder what comes next. The economy as a whole is incredible weak and this is only the tip of the iceberg that is to come in the forms of closings. IT started with starbucks and now is slowly moving outward. Although we will know it will be time to move somewhere else is McDonalds or Walmart closes down in your town.

GM calls reports of salaried jobs cut accurate

2008-07-31T15:03:00.000-05:00

Who wants a new car right now? That is what the General Motors Corporation (GM) would like to know. With gas prices at an all time high and a weak economy, many Americans are not headed to the car dealerships like they were a few years ago. The whole industry in the U.S. has fell 10% in the last year, and GM fell below the average at 16%. In addition, their shares hit a 54-year low in July and things are not looking better for the future months. This is leading GM to cut 15% of U.S. and Canadian salaried workers by November 1. Their plan is to reduce white-collar costs by more than 20% to reduce the amount of layoffs needed. GM is not the only company feeling the strain Ford and Chrysler have also announced salaried layoffs. The demand for the market is no longer present in our society now. The cost is greater than the demand therefore cut backs are being made now to save the company in the end. So who wants a new car right now? I think most of us would love to have a new car right now, but who is going to buy one? The person whose price meets demand will buy a car.

Exxon breaks own record for biggest-ever profit

2008-07-31T12:42:00.000-05:00

In the heat of summer who is really feeling the burn of high oil prices the oil companies or the consumer? Exxon Mobil Corporation, which is based in Irving, Texas, broke a new record Thursday with the biggest quarterly profit ever made by a U.S. company of $11.68 billion (with a 40% increase in revenue from the last quarter). However, this increase in profit fell short of expectations due in part to the balance of increased oil and natural gas prices, but a decrease in sales volume and higher operating costs. Although, we as consumers can sometimes think that the oil companies are setting ridiculous prices it is all in part to supply and demand. With the lowered supply over the past several months the demand is not being met, so higher prices are bring down the demand. By using a demand curve the oil companies are setting the price that will allow their supply to meet their demand. However, the oil companies aren’t being hurt as much by the 8% decrease in crude oil production as some consumers considering Exxon Mobil holds the record for at least the top six most profitable quarters and largest annual profit for American based companies. Exxon Mobil is not the only one making huge profits right now. A Europe based company Royal Dutch Shell fell just short of Exxon’s Thursday high this quarter. So who is feeling the burn more? It is hard to say, but the increased gas prices are becoming an economic crisis for most Americans.

Flying Without Luggage

2008-07-31T11:31:00.005-05:00

As if losing your luggage through the airlines isn't bad enough, how about meeting it when you reach your destination, after you send it separately? Some people are opting out of checking their luggage are are sending it ahead of time. Delta Airlines has announced that they would start charging $50 instead of $25 for just one extra bag. This increase doesn't include the extra cost for bags exceeding the weight or size limit. Although Delta is the only company as of now that has raised their prices, the other companies are expected to follow suit.
FedEx and UPS are the two most promising ways to go in shipping luggage, but the trouble is, how soon do you send it. In choosing this option, it would be necessary to pack well in advance and have your luggage well on its way at least five days before your expected arrival. And all for comparable cost to what you are paying to check the luggage in the first place. The biggest advantage lies in the idea that shipping the luggage gives you the option to use delivery confirmation and insurance on lost luggage. Airlines however, don't guarantee anything lost in route.
So after contacting your hotel to assure they accept early arrival luggage, making sure you haven't packed any "dangerous goods", like aerosol spray, perfume, cologne and nail polish remover, and preparing well in advance, the question that lies is, "Is it worth it?" Would the benefits from shipping your luggage outweigh the extra $25 per extra bag? I say, pack lighter, shoot for one suitcase and a carry-on and you're set.

Prices of Food and Gas Take a Toll in Asia

2008-07-31T04:01:00.002-05:00

The core inflation rate, excluding food and energy, accelerated in Indonesia to 8.7 percent in May from 6.3 percent in December. During the same period, the core rates rose in May in the Philippines and Singapore to 6.2 percent and 6.8 percent, respectively, from 2.6 percent and 3.5 percent.

While oil prices were rising, most others products prices were rising. Oil is most important public products in the world because most factory and transportations using oil. Therefore, the rising of oil prices strongly impact to rising of other products prices. Some countries reduce tax of oil to block inflation. However, that was not a solution. They couldn't block inflation. Now, the oil prices are dropping. Then we can suppose that other products prices will be dropped.

Trouble before the Olympics

2008-07-30T21:43:00.000-05:00

The Chinese government has created a type of monopoly on the internet. They have control over the internet in china and control what people are allowed to see on it. This is becoming a major controversy with the Olympics edging closer because they are limiting what sites the media will be able to access. Normally, the Chinese government regulates what sites their citizens are able to access, however they promised that they would life the restrictions for the media during the Olympics. Overall the internet is not a monopoly because more than one company has access to the internet. In away I believe the Chinese government creates the internet an artificially scarce good as well by controlling who uses it and the websites. I will leave this up for discussion, so please tell me what do you believe china is doing and is it right or not?

Chrysler Needs Back Up

2008-07-30T21:16:00.002-05:00

Is it any surprise that Chrysler or any car manufactuer is struggling in times like this? Chrysler has tried to take promotional avenues that would increase the cars being purchased but they have not been successful. They have decided, instead of calling it quits they are going to pair up with foriegn auto producers. Chrysler claims this will help their never ending drop in sales. There has been some descussion that not only selling cars over seas but making them too will be the primary focus especially for the jeep like vehicles. We all know now that anything the is a SUV or Truck is no longer wanted due to the increases in fuel prices, so instead of completley shutting off the making of these vehicles they are going to seel the ones they can in the U.S. over seas. Also, Chrysler is looking for ways to spend less money in the car making process. They are strongly leaning on having the building of the cars be done over seas for the cheaper labor costs. Chrysler is also trying to cut cost by offering early retirement packages and other early benefits. Chrysler is trying to stay in business because there top selling vehicles are Trucks and SUV's so they will do what is necessary to stay competitve in that Market.

Squid and Oil Face a Common Enemy

2008-07-30T21:13:00.003-05:00

The article on overfishing and the potential extinction of a valuable resource reminds me of the current difficulty with oil production and the destruction of the environment. There is little to no incentive to limit oil drilling and control of oil fields. However there is a monetary control placed on oil production when the oil cartels and OPEC understand that by limiting the availablilty of oil by drilling less the price of oil goes up. Countries and even individual consumers have been forced to pay the higher price because of the dependency on oil as a source of energy and a raw material for industry.

The same control is not true for the fishing industry. As the cost of fish and squid increase, consumers can find ready substitutes - steak or vegetarian meals. Fish is rarely an indispensable commodity for most consumers of the world. Oil on the other hand is not replaceable - at least not yet and not until there is a viable and reliable cheaper energy source and the technology to use it.

Solar power and wind power are two potentially viable sources that future technology may bring into reality. Both are public goods - that is nonexcludable and nonrival in their specific form although a levied cost may make them artificially scarce goods, limiting access to those willing to pay.

For now oil is the primary source of energy for transportation and much of industry. As the demand continues, the "overfishing " of the fossil fuels as well as the associated pollution will continue to threaten the environment and political stability of the world.

One of the hot issues in the upcoming election is the management of the high cost of oil (driven up by both the manipulation of supply by the oil producers and by the surge in demand by developing nations like China and India which have greatly increased their oil consumption). Two different solutions have been proposed. One by McCain is to relax the government regulation that prohibits drilling in protected lands and coastal areas of the United States. The Democratic proposal is to reduce the demand for oil through government regulation that forces auto manufactures to increase the engine efficiency of cars and and increase the development of hybrid and electric cars. Notably in the free market economy, consumers themselves have an impact on the crisis by buying smaller cars, using public transportation, conserving energy in the heating and cooling of their homes, and driving less. Although government regulation is necessary, the consumer behavior is also an important element in decreasing over use and unacceptable levels of environmental impact.

Tobacco regulation bill

2008-07-30T21:03:00.002-05:00

A billed passed on capital hill today that places sharper restrictions on access tobacco and marketing and advertising of companies. It is in hope that the younger generations will not be persuaded to smoke making then live longer and have less of a risk for heart disease and lung cancer. The bill would allow the FDA, Food and Drug Administration, to watch labelling of cigarettes and recall some that are seen as unreasonably harmful. As you know in our youth the negative externalities of smoking becomes cancer which makes generations not last as long and the economy in turn suffers from a smaller market. Although White House administration recommends a presidential veto , we will just have to wait and see what happens in the weeks to come and if the bill will be good or bad for the economy.

Rise in Gas Price, A Surprise?

2008-07-30T17:21:00.001-05:00

On Wed, 30 a rise in sweet crude reached a $4.58 increase. This was not expected rise in fact experts believe that prices would continue to fall because hurricane Dolly did not effect production as much as expected. The reason behind the rise was do to a decrease in supply. For approximately prices for crude had slowing been decreasing allowing the national average for regular to drop below $4.00 a gallon. A problem with dropping gas prices is that when people see $3.65 a gal they become happy and start driving more, which in turn increases the demand, which again increases the price of gas. Gas is an example of an excludable product. People have to pay for the product, no matter what the price. Also when people start to use more of the product there isn’t the same amount for others to use, which in this case makes the price rise.

Externalities in Rubber Ducks

2008-07-29T21:52:00.002-05:00

This article describes new legislation to control hazardous materials in children's toys. Lead and phthalates (the latter a chemical to make rubber and plastic more pliable) are chemicals related to negative health effects especially in young children. The recent problems with the contamination in imported toys alerted Congress about the need for higher standards and more oversight in the regulation of certain private goods.

The chemical contamination in manufacturing represents an externality. The question of whether it can be observed directly or not is still debated. Although the amount of lead and phthalates can be measured, the amount of harm they impose on the consumer is what is debated. Those in favor of regulation site studies that show exposure to these chemicals produces negative health effects in animal. The manufacturers and their lobby argue that the scientific evidence is inconclusive. (A National Public Radio program compared the current debate over these chemicals with the earlier one that focused on saccharine as a carcinogen.). Therefore regulation of this chemical will need to focus on the original action (page 456 in Chapter 19) rather than on the outcome. That is, what is being regulated is the presence of the chemical itself and not the health problems which remain uncertain and hard to measure.

There would be little incentive for manufacturers to change their use of this chemical and it would not be possible to depend on the market to regulate it since consumers have no way of telling from looking at the product whether it is contaminated or not. Therefore governmentregulation is required to control the negative externality of the rubber duck and all toys.

The Optimal Polution in a Command Economy

2008-07-29T21:20:00.002-05:00

attempt to clear the air for the athletes) faces in trying to undo in a few months what has This article discusses China's attempt to deal with air pollution in time for the Olympic games that will begin in early August. The article (and others that have been following Beijingidentifies the overwhelming difficulty that Beijingbuilt up over decades of poor regulation of emissions as well as recent surge in economic growth and industry.

Part of the Chinese difficulty comes from a command market economy in which the public serves the wishes of the government and has no power to force regulation of negative externalities on their own behalf. Private enterprise is similarly limited and so the regulation that comes from a market economy is also missing.

As the article points out, the same factors that got China into the pollution bind are those being used to try an emergency fix. The government ordered that factories be dissembled and moved in their entirety to the farmland far from the city. The cost was considerable both in lost production, manpower, and resources. However, the benefit to the country in terms of world perception and success in hosting the Olympics was viewed by the central government to outweigh the cost. As the article points out, the efforts may be too little too late to effectively control air quality.

The effect of the pollution in China, the level of which bypassed that considered optimal in the West, now will have global effects through the reactions of individual athletes. The negative externalities have increased dramatically because of the unique circumstances of the Olympic games. But they are not easily eliminated or controlled. The Chinese government has viewed pollution as an unavoidable consequence of economic growth and ignored pollution as a side effect. Now the interest has changed and decreasing pollution is an ultimate goal. In a command economy the optimal pollution is whatever the government decides at whatever cost it takes.

Markets Can Make Fisheries Sustainable

2008-07-29T17:19:00.002-05:00

This article discusses government regulatory policy to combat over-fishing. The author of the article focuses on the effectiveness of IQF's (Individual Transferable Quotas) in the fishing industry. The system is similar to tradable permits in the control of pollution. The government issues IQF's to fishermen in an attempt to counteract overuse of popular fishing areas in the ocean ( a common resource). The IQF's establish well-defined property rights for fishermen. The author comments on the higher effectiveness of the IQF system in contrast to other methods of government control on the fishing industry. Governments can limit the fishing season or net sizes, but both of these options lead to over-capitalization. Costs for the fishermen increase but the pressure on fish stocks in not relieved. The IQF's on the other hand lead the market to more efficiency because the quotas are tradable, they lead to increased safety through reduced incentives to go out in inclement weather, and they eliminate the incentive for the government to shorten the season, leading to an improvement in the quality supplied. New Zealand uses an IQF system to regulate nearly its entire fishing industry. In the United States, IQF's have improved the over-fishing of Alaskan halibut and Virginian striped-bass. This article provides a real-world example of how to efficiently use and maintain a common resource as discussed in Chapter 20.

Some comic relief as the course draws to an end

2008-07-29T17:02:00.002-05:00

I found this while searching for some serious issues to post for this section of the course. I got a kick out of it. If you play the clip, it will display more clips to view with similar sentiments. I found it on an environmental economics blog, www.env-econ.net

Apple’s 3rd Quarter profit jumps 31%

2008-07-27T19:18:00.003-05:00

In the 3rd quarter, Macintosh and iPod helped boost Apple Inc.’s scrawny earnings 31%, beating Wall Street’s expectations Monday. Apple earned $1.19 per share, or $1.07 billion , 11 cents ahead of analysts’ view for $7.31 billion. Apple sold more Macs than ever before, 2.5 million, up to 41% from a year ago. Apple also said iPod sales jumped 12%, Peter Oppenheimer, chief financial officer said, “The quarter was a home run” In an interview. Apple’s share’s sank $18.04, or 10.8%, to $148.25 in after-hour trading, after gaining $1.39 to close at $166.29.
Apple Inc’s conservative outlook tends to usually make them shoot low in their predictions for 4th quarter earnings. Apple only predicts a profit of $1 per share on $7.8 billion in sales, well short of Wall Street expectations. Through the plagues of expectations in the stock market Apple has been one of the strongest competitors, while still making profit when the economy is down. In the future, investors predict that Apple’s gross margin will drop. In response to this accusation, Apple Inc. noted that margin was actually better than expected, helped by better commodity prices and stronger sales of higher margin products. Oppeheimer forecasts even lower margins in the 4th quarter, tied in part to the launch of the undisclosed new products.

XM-Sirius satellite radio gets the green light to merge from the FCC

2008-07-26T18:46:00.003-05:00

Sirius Satellite Radio Inc. bought rival XM Satellite Radio Holdings Inc. for $3.3 billion. This means that subscribers will be able to have access to both stations, it was also said to create huge cost savings for the industry. FCC Chairman Kevin Marin told the Associated Press, “Consumers will enjoy a variety of programming at reduced prices and more diversified programming choices.” The two rivals kept each other on their toes, the one fear that Democratic Commissioner Jonathan Adelstein has is that they will turn into a monopoly. Republican commissioner Taylor Tate insisted that the companies settle charges that they violated FCC rules before she would approve of the deal. Both companies agreed this week to pay $19.7 million to the U.S. Treasury for violations related to radio receivers and ground-based signal repeaters. The merging companies said that their merging would create hundreds of millions of dollars in cost savings and lead to greater choice in programming for subscribers and flexible pricing options. The FCC approval faced a steeper climb because the companies were prohibited from combining under terms of their licenses. The agency struggled to come up with a way to show that allowing a satellite radio monopoly was in the public interest. Sirius and XM also have promised to include a limited “a la carte” offering that would be available within three months of the close of the deal and allow listeners to pay only for the channels they want to receive.

FDIC takes 2 more banks and closes 28 branches

2008-07-26T17:39:00.001-05:00

On Friday, July 25 2008 28 branches of the 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed by federal regulators. The FDIC said the takeover of the failed banks was the least costly resolution and all depositors will switch to Mutual of Omaha with “the full amount of their deposits.” As of June 30th, the banks closed by the FDIC had total assets of $3.6 billion. Most of the assets are in 1st National while First Heritage accounts for $254 million. In Nevada, 1st National has 10 branches and employs about 350 people. Bill Uffelman of the Nevada Bankers Association said Friday the FDIC action “is a reflection of the times for the banks. It’s a poor economy.” Uffelman cautioned against the sort of consumer concern that prompted customers to wait in line for hours to withdraw funds after IndyMac Bank branches were seized by federal regulators. All FDIC-insured bank deposits are guaranteed by the FDIC up to $100,000, Uffelman noted. So all the customers of the bank that have up to $100,000 are safe, but those that have more than $100,000 may have some trouble taking hold of their cash.

Price drop of crude oil finally hits home

2008-07-26T15:52:00.001-05:00

Gas stations customers finally have a reason to be relieved, because the dropping price of crude oil has finally reached gas stations nation-wide. The national average for a gallon of regular gas has pulled back to just above $4 a gallon. It has been stated that prices at the pump are poised to dip even further, and could cost as much as 25 cents less by Labor Day. AAA spokesman Geoff Sundstorm said, “People say typically prices shoot up like a rocket, fall like a feather. But this time…..it looks like it’s different,” “The retail sector is interested in bringing these prices down as fast as they can to stimulate business in their convenience.” The price of crude oil fell $2.23 and settled at $123.26 a barrel, and earlier the contract dropped even further to as low as $122.50.

Amazon remains resilient as Economy weakens and gas prises rise

2008-07-26T13:36:00.003-05:00

The high gas prices and withering economy don’t seem to be bothering Amazon.com Inc. The internet retailer reported Second quarter earnings that more than doubled and easily topped analysts’ expectations. The company’s shares jumped $6.07, or 8%, at $76.58 in after-hours trading, after finishing regular trading up $2.57, or 3.8%, at $70.54. Amazon.com Inc.’s chief executive, Jeff Bezos , suspects that increased fuel prices will actually give Amazon a “relative advantage” over other retailers. Bezos says that the increasing price of gasoline is making customers rethink the idea of going to the mall or outlet, so they decide to shop online. Amazon’s free shipping offers and “Amazon Prime” are even more valuable now to customers because of the current circumstances.
At the end of the quarter, June 30th, Amazon earned $150 million, and in the same quarter last year earned $78 million. The company’s revenue took a leap and climbed 41% to $4.08 billion, including a 35% leap in North America. The company’s net cost climbed to $128 million from $75 million last year.
The reasonably confident internet retailer has increased its sale forecast for the rest of the year to a range of $19.35 billion to $20.10 billion.

Facebook.com Inc. cracks down on abusive applications

2008-07-26T13:25:00.001-05:00

Facebook.com Inc. promises to intensify its efforts to wee out programs that violate its rules for protecting users’ privacy. More than 30,000 applications have been designed to run on Facebook since the company opened its site to outside developers 14 months ago. Millions of Facebook users have taken the most successful applications with open arms, helping the applications turn into hot commodities. Facebook.com Inc, estimates that the makers of its top applications have raised over $200 million form venturing capitalists.
As the number of applications has over flown Facebook, its users have increased form 24 million in May 2007 to around 90 million today. This rapid growth has narrowed Myspace.com’s lead in the internet’s social network niche and helped privately held Facebook secure since a $240 million investment form Microsoft Corp.
Having so many outside applications on the side has caused some stress for Facebook, too. Some applications have included security holes that gave web surfers unauthorized peeks at the personal profiles of Facebook users. “Facebook has already removed about 1,000 abusive applications since it opened its Web site and plans to move even more aggressive as it establishes clearer ground rules for operating on its site” said Benjamin Ling, Facebook’s director of platform program management.

Fun at the Pump?!

2008-07-23T19:34:00.001-05:00

Since 2006, the number of televisions atop gas pumps has skyrocketed. Now, 3 private held companies have placed more than 20,000 screens at thousands of gas stations from the Massachusetts Pike to southern California. Roy Reeves, Vice President of sales and marketing for PumpTop TV, says, “We try to bring some fun to the pump.”
Not only are the televisions relieving some stress, but they are bringing in some added revenue for gas station retailers, which have seen a shrink in retail due to an increase in fuel load costs and credit card fees.
It has been reported by Gas Station TV, which tracked its retailers’ sales, saying that stores with the TVs sell 75% more car washes and 69% more snacks if they are advertised. The companies that advertise on the televisions at each gas station, pay “rent” in exchange for placing the flat screens above the pump.
Once a customer starts the pump, the TV comes on. You can’t change the channel or volume, so the customer usually tunes in. It also appears that customers are more willing to buy the products that are advertised and also remember what was advertised. According to a Gas station TV and Nielson Media Research Study, 70% of the people who watched the ads remembered the product advertised, and 89% of customers were willing to buy the product after seeing the ad atop the gas pump.
“One of the pit falls for convenience store owners is that people pay at the pump,” says Richard Divine, head of the marketing department of Central Michigan University. “People don’t want to go inside anymore. But at the gas pump you have a captive audience.”
The main purpose of these TVs atop gas pumps doesn’t seem to be advertisements, but to distract the customer from the $4.22 per gallon of gasoline we are paying for.

Microsoft cuts price of 20GB Xbox 360 by $50 to make way for 60GB model

2008-07-20T11:07:00.002-05:00

Starting Sunday, July 27, Microsoft’s mid-range Xbox 360 consol with a 20GB hard drive will cost $299. The updated Xbox 360 is set to arrive in stored in early August. The new 360 will cost $350 and will have a 60GB hard drive, which will give the consol significantly more space for storing games, TV shows and movies Microsoft sells on its Xbox live marketplace wed site. The 60GB Xbox 360 consol is also said to have some extra appeal with streaming movies and TV episodes through high speed internet offered by Netflix.
Although Microsoft adjusted its price of the 20GB 360, it did not change the price of the more basic Xbox 360: Arcade version (256MB, $280) or the Xbox 360 Elite ($450, 120GB). Microsoft released the Xbox 360 1 year ahead of competitors Nintendo corp. and Sony corp. As of the end of May 2008, Microsoft had sold 10.3 million Xboxs in the US. By comparison, Nintendo had sold 10.2 million Wii consoles, and Sony had only sold 4.5 million Playstation 3 machines. While Nintendo has consistently kept the price of the Wii at $250, Microsoft and Sony have been scrambling to cut their prices while still being able to obtain profit.

Cell phone trafficking causing increased loss of millions to cell phone companies

2008-07-20T10:25:00.003-05:00

Cell phone trafficking causing increased loss of millions to cell phone companies

Cell phone companies have made it so easy for people to purchase cell phones that it only costs $15 to get one loaded with minutes. But a new problem has arisen for the cell phone companies, hackers and cell phone trafficking. In states like south Florida, New York, California, Georgia, Texas and elsewhere, traffickers have figured out that they can make huge profits by purchasing thousands of low cost “pay as you go” phones and hack into the software so that calls can be made on any cell phone network. After phones have been hacked into, they are sold all over the world and this costs the cell phone companies 10s of thousands of dollars. It is not illegal to unlock the software in your “personal” phone, but cell phone companies base their profits off of people buying their minutes. When numerous people hack into their phones for free minutes the phone companies lose even more money.
TracFone wireless is one of the leading producers of the cheap “pay as you go” phones. The company is suing traffickers across the nations and hoping to put a stop to this “siphoning of profits”. The unlocked phones are sold for between $40 and $60 above the TracFone discount price, and are frequently marketed in lots of 10,000 or more.
In recent months, TracFone has filled 39 lawsuits. Lawsuits similar to TracFone’s have been filled by AT&T, Nokia corp., Virgin Mobile USA Inc., and Motorola Inc.
TracFone and other companies have argued that, under federal law, the phones must be used with the minutes that were bought from the company that sold the phone. Companies like TracFone, lose profit when people buy minutes from other companies.Some cell phone companies disagree that cell phone hacking is wrong. A company called Incomtel, which is the self-proclaimed “Cellular supplier of the world” was among those companies that were recently sued by TracFone. In court, Incomtel lawyers argued, “that it is perfectly legal to buy phones from stored such as Wal-Mart, CVS and Target and modify them to work with any cell phone system.” Incomtel also said, “because the phones made by Motorola and Nokia are purchased on the open market and are repackaged for resale, Incomtel is under no obligation to incomtel.” So far, TracFone and similar companies have been winning more cases than losing

High Gas prices affecting Students

2008-07-17T20:39:00.001-05:00

In this article, the reader is shown that the price of gas is affecting college students and their education. Since the price of gas is so high, more students are enrolling in online courses opposed to traditional classroom ones. This is an example of cross-price elasticity of demand, as the demand of online courses increase the demand of gas decreases for these students. People everywhere are doing all they can to save money at the pump, whether buying more fuel efficient cars or finding ways to get the same education without leaving home.

American King of Beers no longer

2008-07-14T17:01:00.002-05:00

Remember the days when America was the more powerful country in the world? Where America companies were considered the premier company in whatever area of business they were in? When American's would outsource their jobs to other countries? These days are coming to a halt. Inbev, Belgiums largest beer producing company has agreed to purchase Anheuser-Busch, which happened to control almost 50% percent of total U.S. market shares of domestic beer sales. Just what does something like this say about our weakening country? To many people Budweiser stood as an American symbol. Many people feel that this would be the same thing as agreeing to sell the Statue of Liberty to Canada. Just the other day I found out that Indian conglomerate TaTa recently outsourced some of its jobs to Marietta's very own Reno. What did Tata set up? A calling center. The days of joking about calling Microsoft and talking to an Indian are fast approaching a close. Now Indians are joking about having to talk to Appalachian Americans for their problems. Let that sink in. It is now more expensive for India to hire their own native workers then it is for them to hire American workers. Scary huh?

Going Completely Gas Free for $100,000

2008-07-14T15:57:00.002-05:00

Over the past few years, changes have been discussed in order to develop a solar, or electric automobile. A man by the name of Elon Musk, however, is putting just that idea into action with the Telsa. Yes forms of these cars have been developed, but currently Elon has production under way, with a plan for the future.
In the article, he discusses that although there aren't many being made currently (at just 1,800 a year) the trend seems to be following that by late 2010 there will be 20,000 cars on the market. As production continues to develop, Elon discusses, the price will continue to drop as well. Similarly as to our class lessons, he explains that "when you change the production quantity by a factor of 10, you can reduce the price by a factor of two." This follows the main idea of supply and demand.
Elon, goes on to further explain his products advantages which lead to consumers choosing his car over one that GM and Toyota may produce. The Telsa provides a completely gas free option for consumers. In the GM and Toyota cars, the gas is used complementary to the electricity. These cars do plug in, but unlike the Telsa, they use both forms of fuel. The idea that no gas is needed whatsoever is the most flattering advantage to Elon's product.
Deeper into the article, the idea of a carbon-cap or tax is discussed. Elon explains that he would rather see a tax due to the simplicity. Similar to our class lessons, this idea of a tax or cap provides a question. With the new electric cars-that do not burn fuel themselves, but use electric often produced by coal burning plants, and the development of hybrid's produced by GM and Toyota, there will be a rise in the production of carbon. Which idea is the best to limit this form of form of pollution?

New York Magazine Buys MenuPages Site

2008-07-14T09:50:00.003-05:00

This article is contrasted with Yahoo.

http://www.time.com/time/business/article/0,8599,1822290,00.html

Yahoo rejected Microsoft proposal. Economists who work in MenuPages and Yahoo have considered their profits.

Yahoo said it unsuccessfully reiterated its willingness to sell the entire company to Microsoft for $47.5 billion, or $33 per share — a bid that the software maker dangled in early May before withdrawing it in a pique over Yahoo Chief Executive Jerry Yang's demand for $37 per share.

The other side, New York Magazine buys Menupages site. Menupage's economist might think this way is much profitable than keep their company. Also, New York Magazine economist might think that this way is much profitable than they make their new own site.

When Gas becomes a Prize

2008-07-14T06:57:00.002-05:00

When you see things being given away through a lottery of even a buying incentive it is usually money or some sort of item. For instance I was at the golf course the other day and noticed a big advertisement for the new $ 400 Callaway driver and I didn't think anything of it until I read on the sign, that they give you a $100 gas card if you buy one. This deal at one point in time, would not have been a incentive for anyone to buy the driver but now its like wow, a gas card I could really use that. Well that is exactly what the Florida lottery is also hoping will happen is people will buy lottery tickets in hopes of winning free gas for life. Yes, for life I know crazy. The winner would be award 26 gas cards a year, each worth $ 100 for life. So like everything else there is no guarantee that money will actually cover the price of gas in the future. The question you have to ask is when will gas be too expensive to not cover the cost. The lottery ticket only costs five dollars but the article does not mention the odds of winning, but they probably are average because it is the second prize listed on the ticket not the first, which is a quarter of a million dollars, some think the gas is a better deal.

Toyota's plans to scale back on truck production

2008-07-13T19:48:00.003-05:00

Not immune to the effects of soaring gas prices, Toyota Motor Corp., like its Detroit cousins, has announced plans to suspend production of its full-size pickup Tundra and its truck-based SUV Sequoia. Toyota plans to halt production starting August 8th. As gas prices continue to escalate, the demand for trucks and truck-based SUVs has decreased. Sales of the vehicles are down and inventory isn't moving. Toyota has the capacity to build 400,000 trucks but forecasts indicate only 150,000 in actual sales. Their trucks are sitting on lots for 64 days before they sell. These stats are almost unheard of for Toyota according to analysts at J.D. Power and Associates. The cutbacks in production will affect more than 10% of Toyota's 43,000 employees. Toyota is now faced with the challenge of focusing its manufacturing operations on its best sellers in the current market conditions. A new plant is under construction in Blue Springs, Missouri where Toyota will build hybrid Priuses, and production of hybrid Highlanders will move to Indiana. The decrease in demand for more gas intensive vehicles is causing productions shifts for American automakers and changing the face of the auto industry.

Salvage yard haven for do-it-yourself customers

2008-07-09T17:57:00.000-05:00

The growing trend of salvage yards has begun to sweep the nation. This very cheap way of finding parts of old smashed cars for your car that could possibly need parts replaced, it affordable and effective. People that go to these also res-sell the parts they pry off the junked vehicles.

Today, if you recycle scraps you can receive up to $300/ton. Automotive Recyclers Association president, Sandy Blalock, said “At one time, a crushed car would go for $20 to $30 a ton. The market for scrap metal has skyrocketed so high that a family said they were able to put 3 kids through college by selling scrap metal on e-bay. Pull-A-Part, a self-service yard, only charges $1 for admission, $1 for wheelbarrows, also there is a flat fee price for each part. At times, customers are charged a $3 core deposit as an incentive to bring the old parts back so Part Galore can recycle it.

Wal-mart branches out to use locally grown produce

2008-07-09T17:55:00.000-05:00

Wal-mart has been named the nation’s largest buyer of locally grown fruits & vegetables. Wal-mart plans to buy $400 million in produce grown in its states this year. By only buying local produce the company estimates it will save $1.4 million in annual savings, 100,000 gallons of diesel, and 672,000 food miles.

An obvious notice in the change in Wal-mart’s consumption of local produce is that it only used to buy a few peaches from a few producers, now Wal-mart buys 12 million peaches annually from 18 different producers. This move by Wal-mart could easily change the market for farmers. Restaurants have been willing to spend more money for fruits and vegetables they know have come from local farmers, something that Rich Priog says could change when Wal-mart moves into the territory and negotiates. Also, identifying locally grown food in stores aisles could relieve customer concerns, especially after recent salmonella outbreak linked to tomatoes that sickened at least 869 people across the country.

Starbucks plans to close 600 U.S. stores

2008-07-09T17:53:00.000-05:00

During the days when people were willing to buy $4 lattes, Starbucks was a coffee “mecha”. But it is obvious that these days are over. On July 1, 2008, Starbucks Corp. announced it is closing 600 company operated stores in the next year, due to the US economies downward spiral, that had hastened the pain caused by the companies own rapid expansion. After the announcement of the future of the closing stores, stock prices jumped 72 cents. 70% of the stores that are planned to close were opened in 2006. The closing of these stores won’t be free, 12,000 workers will be unemployed. Starbucks will have to pay $8 million in severance costs and a total of $348 million in charges related to the closures. Pete Bocian, Chief Financial Officer, says 25-30 % of a Starbucks shop’s revenue is cannibalized when a new store opens and that the closure should help return some of that revenue to the remaining stores. Although the company is closing 600 stores this year, it plans to open fewer than 200 in 2009, and fewer than 400 in 2010 & 2011.

Blockbuster withdraws plan to acquire Circuit City

2008-07-09T17:50:00.001-05:00

Because of the market conditions the past few years, Blockbuster announced that it is going to withdraw its proposal to buy Circuit City. Chief Executive James Keyes said that the proposal deal, a price of $1 billion, made no economic sense due to the market conditions. Keyes also announced that Blockbuster will merge movies and games with the sale of electronic devices under one roof, but it will be Blockbusters own stores.

Blockbuster stocks have fallen since April, by 20%. The shareholders stocks have dropped below $3 from its peak near $31 in May 2006. Many investors are skeptical of the marriage between Blockbuster and Circuit City because both companies lost money last year. Circuit City reported that its loss tripled and same store sales plunged 11% in the quarter that ended May 31, 2008. Best Buys profit also declined by 7% last quarter ending May 31, 2008 (losing $85 million last year on revenue of $5.54 billion). After the announcement Circuit City’s shares dropped 34 cents, or 11.8% and Best Buy’s shares rose 27 cents, or 11.6%.

Elasticity and Gasoline Prices

2008-07-02T06:08:00.002-05:00

Martin Feldstein gives his take on rising oil and commodity prices in this story here. A large part of his story involves the concept of price elasticity of demand (and supply). Both food and gasoline have very low price elasticities of demand in the short run as consumers find it difficult to substitute away from these products. Read his entire (short) article for the rest of the story (and then go impress your family and friends with you new knowledge of commodity markets).

Greg Mankiw has been keeping track of news reports that illustrate how consumers are reacting to higher gasoline prices here and here. He entitles his blog posts "Cross-Price Elasticity."

Money in the Air, Five Airlines Fined for Conspiring

2008-06-26T19:35:00.003-05:00

Air France, KLM, Cathay Pacific, Martinair, and SAS, all of which are national airline companies have been charged a whopping total of $504 million dollars after being involved in a conspiracy to fix cargo rates throughout the entire industry. The rates were higher, and eliminated competition. However, the problem with the entire situation is that consumers were the main victims. According to Scott D Hammond, deputy assistant attorney general in charge of criminal enforcement for the department's anti-trust division, consumers and American businesses were the ones to pick up to tab for the increase.
Similar penalties have been faced by other airlines in the past. Should heavier restrictions be made in order to keep this problem from reoccurring?

Rising Prices Due to Flooding in Midwest

2008-06-26T17:49:00.002-05:00

I am sure we have all heard the horrible flooding that has happend in the midwest. We can all only imagine how much damage has actually been done. Federal and state officials have started to tally up the total economic cost. They are projecting that the damages will cost in the billions. 88 million dollars has been given to the sufering states to start to rebuild their houses and for other important needs like crops.

Due to this natural disaster the price of corn and other crop food will rise and there might even be a shortage of supplies especially since we are now into the popular corn eating season. Most people think that the only economic problems occur to only the people that are located where the disaster took place but that is not the case. This disaster will cause problems all over the united states because the food will be more money and will be harder to find because of lack of supplies. What can the government do to help control this economic loss? Will setting a tax or a price ceiling/price floor? Where will the gain be, with the producers or consumers or neither? Do you think deadweight loss will be higher than normal?

The Demise of Suburbia

2008-06-26T15:12:00.002-05:00

The price of gas is causing many people to rethink the way that they love their lives. Be it the vehicle they drive or how high/low they set the thermostat, but one thing is for certain, the rise in gad prices is driving those that live in suburban areas to move into the cities or at least closer.

People can no longer afford to refill their propane tanks for heating, or pay that costly furl price if one makes a hour long commute everyday. However this only presents complications. Firstly, the decline in property value of suburban homes and an increase in city homes. People want to move into the city but find themselves either unable to find a place to live or are unable to pay the increasingly high monthly rates. So are we seeing a reverse in how Americans live their lives?

Brazil Strikes Oil

2008-06-26T10:48:00.002-05:00

Recently, Brazil, an already oil-rich country, has located 700 million barrels of oil in the ocean surrounding the coast. The oil reserves are located over 400 meters below the oceans surface and because of this great depth, Brazil's progress in drilling to the oil has been slowed. By the year 2011 they should be able to start producing the oil and will then climb the economic ladder not only on South America but also in the rest of the oil producing world. Other countries competing for the richest in oil, like Saudi Arabia, are producing up to 12 million barrels a day while even with this new discovery in Brazil, they still are only estimated to produce about 1 million barrels a day. Since the US and Brazil are partners in trade, this new discovery will hopefully lower the prices at the pumps here in America, and further increase trade to the country. With the new success and profit gained by Brazil, and the constant supply of oil to the US, Brazil will have fat pockets full of American dollars that will in turn be used to buy American goods. If this snowball effect continues, the Brazilian economy will skyrocket and the American economy should follow in suit. This hypothetical situation is one in which both the US and Brazil will benefit but only time and technology will tell if this new discovery of Brazilian oil will actually last and better Brazil's economy. I firmly believe that within the next few years the United States' government will put forth great efforts to better befriend the Brazilian government; all in hopes to better its own economy in the long run.

South Korea Lifts Ban on U.S. Beef

2008-06-26T06:17:00.006-05:00

I know this is really not related to our chapter. However, if we think about how South Korea will do to protect their cow business, we can realize that it is related to our chapter. South Korean worry about mad cow disease. However, every other country people may think if South Korean didn't buy American beef, that is no problem. But, the American beef is really cheeper than Korean beef. Also, they know the American cow has mad cow disease and this is really harm to human. If the American beef is imported to Korea, most restaurant would use American cow because it is really cheep. Also, some restaurant fake to Korean. Every people couldn't eat food only their home. Therefore, they ban about American cow. In this case, what the South Korean government should do? There are two ways. The first way is that they take some excise tax to American beef. The other way is that they imposes a nonbinding price floor to Korean beef. The ways can protect Korean beef because customer want to buy more cheeper product.

Oil Decision

2008-06-25T22:59:00.002-05:00

There is no question that oil and gas prices are on everyone's mind. This article shows the debate over offshore drilling for for oil. The demand for oil has increased more and more each year and companies are becoming desperate for finding oil. The high price of oil causes high gas prices and high home-heating bills. Polls show that American people are extremely frustrated at the high prices and criticize the major oil companies. This debate over drilling offshore is very vital to solving or fixing the oil shortage. If offshore drilling is increased than the possibility for finding oil is a lot higher. Unfortunately the supply of oil is decreasing as the demand is increasing.

Jelly Belly in high demand

2008-06-25T21:50:00.002-05:00

Although Jelly beans are not in the peak season of easter or any other holiday for that matter the Jelly Belly company is still seeing an increase in demand. Many people just say that the brand is more appealing because of the looks and taste which could be a reason for the increase. The simple fact that people like the brand better than others, which is making the supply of beans go up. Sales have gone up twenty five percent, which is thought to be directly linked to better marketing and globalization of the increasingly well known company. There is talk that due to the better avalibility from higher supply, that demand will go down because the thrill of the hunt for the prized possessions will be lost. The company Jelly Belly is now faced with the challenge to continue to increase both supply and demand to reach a higher equilibrium.

Why oil prices will tank

2008-06-25T19:12:00.002-05:00

So you are saying to yourself right now, "Enough with the gas prices already". The topic is a hot issue right now and will remain so for sometime. So sorry, it is another article about gas prices. But this article offers a little bit of hope, based on basic economics. Now whether it will play out the way the author predicts is yet to be seen. But if you drive at all, how can you not read an article titled "Why Oil Prices will Tank". I found it particularly interesting because it cost me $52.00 to fill my Mazda6 sedan this evening. It just seems wrong to pay over $50.00 to fill up a sedan. I may date myself some as I am not a traditional student, but I can remember back in the mid to late 90's when I was in college the first time, that gas was $0.99 a gallon. I could fill up my little Cavalier for $11.00! Does anyone remember the days when you were excited to be given $5.00 in gas money from your parents and you could run around all weekend on that. That will only get you about 1.25 gallons of gas now.

The author makes the point that if you consider gas prices in terms of basic economics, the issue is not whether gas prices will decline, but when. Worldwide demand has surged and supply has decreased due to government control and mismanagement. And we know from Chapter 3 that a simultaneous shift in both the supply and demand curves, in this case, demand increasing and supply decreasing, will lead to an increase in price. But the author contends that the price cannot remain elevated indefinitely. The current market is "classically unstable" with the increased demand and decreased production throwing it out of balance. With record-breaking profits in the oil industry, people realize there is money to be made and new supplies will be developed. Demand should start to decline as well, if slowly. At least in my life, demand for gas is relatively inelastic. I do what I can, but I have to drive to work everyday and that quantity of my driving does not change with the price level. But the oil market has under-anticipated the conservation brought about by high prices. Car sales are decreasing, Americans are cutting down driving, and airlines are scaling back flights. So these factors together, in theory, should bring down the market price of oil. Though the point of the article may simplify the complicated oil market, it gives cause for hope that we may see lower prices at the pump...eventually.

TV's Shrink in the Big Economic Picture

2008-06-25T15:10:00.002-05:00

This is an interesting article about the waning demand for luxury items in the face of increasing food and energy prices, specifically what the article refers to as "the Humvee of TV's - the 46-inch-and-above, $3,000.00 plus flat-screen high-definition set". Industry analysts are finding that people are spending less on TV's overall, however, some are shifting spending away from luxury models to smaller sizes and concentrating on lower-priced models. The demand curve for higher priced TV's has essentially shifted left. This has led to an increase in supply. Riddhi Patel, an iSuppli TV Analyst, states that "inventory levels are at 8 weeks, which is very high."
What will be the result of this decrease in demand and an increase in inventories? The equilibrium quanitity and price will decrease. The prices on these luxury TV's will have to lower to clear the inventory, and many firms will have to cut back on production to adjust to the decreased demand. But industry analysts are hoping that the lower prices would stimulate more demand for these items, especially in the wake of increased travel costs. With gas at or exceeding $4.00 dollars a gallon in most places, maybe buying a cheaper big screen TV later this summer and staying home and watching a movie located at the beach will be just as nice as being at the beach.

America's untapped oil

2008-06-23T18:30:00.001-05:00

The hot topic in today’s news is the price of crude oil and its effects on the economy. As discussed in the previous chapters supply and demand has a large effect on how much is produced compared to how much is consumed. Theses chapters also discussed ways that the government implements laws that are suppose to help the economy and unfortunately hurt the economy. The government has implemented banning laws forbidding oil companies to drill in parts of Alaska, coast of California, the entire east coast and the gulf coast from Florida to Louisiana. These laws were originally designed to prevent any damage to the wildlife, however these laws now prevent the needed amount of crude oil production. Some experts say that the oil companies are not even drilling all the areas they are allowed to; why should they give them even more oil. The oil companies replied by saying that they have to research areas in great depth before they risk drilling these areas. As a petroleum engineer, this fact is true. Before taking the risk of drilling a multimillion-dollar dry hole, it is key to determine whether or not hydrocarbons exist. I also know that the oil industry is like any other major corporation and plays the market to make as much as a profit as possible. A few questions that were discussed in America's untapped oil, written by Steve Hargreaves were: Are oil companies not using their resources to the fullest? Would allowing oil companies drill in these areas benefit the economy? Should only a few of the areas be opened for drilling?

Shortages in Agriculture

2008-06-23T10:50:00.006-05:00

I had a hard time coming up with something that really related to what this next exam is on, but I did find a blog article that talks about shortages. These shortages are competely unrelated to any price floor, but rather due to the weather. We've been discussing that there are price floors in the world of agriculture to help protect the farmers, but as we can see from http://www.agweb.com/Blogs/BlogPost.aspx?src=OutlookToday&PID=8dd94e8b-d534-42a7-9da0-1c5c06983589 the price floors aren't even a factor. I think it will be interesting to keep an eye on the crop markets as the year continues to see what prices do. I look for them to keep sky-rocketing due to the shortages. A good website to watch is: http://www.agweb.com/Default.aspx it shows what the different markets are doing. These high prices and shortages really concern me, because my in-laws farm, but they don't sell these crops, they own a hog farm, and therefore they have to pay these high prices in order to keep the hogs fed. However the pig market is not following suit in the high price category. Hog prices are down in fact. So who helps these farmers? Do they have, or will they get a price floor to help them??

Have gasoline prices really risen?

2008-06-18T21:17:00.004-05:00

Ok, everybody knows that the price of gasoline has been steadily rising for some time now. The media is flush with images of frustrated drivers, posturing politicians, and scapegoat oil executives testifying before the Senate. What and who's to blame for the rising price of gasoline? Is it all supply and demand?

First of all, let's be sure that gasoline prices have really been rising--after all, lots of prices rise over time. What we're really interested in is the relative price of gasoline (that is, the price of gas relative to the overall price level). The chart below shows gasoline prices from 1976 to 2008. You'll see two lines in the chart: the blue line represents the "current" dollar price while the red line represents the "constant" (or inflation-adjusted) price of gasoline.

Notice that the constant dollar price of gasoline rose quite dramatically in the late 1970s and then steadily declined until the mid-1980s and was essentially flat until the late 1990s. Since then, the real (constant dollar) price of gas has again risen quite dramatically, reaching an all-time high just within the last month or so.

So, why is the price of gasoline rising? The simplistic answer is that it's all supply and demand. To explain a rising price it could be that the demand curve is shifting out to the right or that the supply curve is shifting to the left. What factors are most people pointing to as shifting these curves? How can we tell which factor is the dominant cause of the rising gasoline prices? (This question is analogous to Question 5 from Chapter 3's Problem Set II.)

Individual Choice and Advertisement

2008-06-12T08:36:00.001-05:00

Chao Gao
Advertisements always affect individual choice. The individual choice is the first
principle of economic, so it is very important for economy.
I think the most effective way to influence the individual choice is advertisement. Advertisement can let people the functions and features about a good. People must know everything about a good than they will consider buying it or not. So there is question that how people know about a good or product, a person does not know everything about the features of a good, we are not experts in every area. So what should we do when we want to buy or realize some commodities in our daily life? My answer is advertisement, advertisements exist everywhere in our life, when you walk in the street, open TV, and search the internet, you can see them every time in everywhere.
For instants, I want to buy a mobile phone, which phone should I choose become the first question, so most of people would to look for some advertisements about mobile phone, therefore people will open TV, search the internet, and buy a magazine to fine some advertisements about mobile phone, and compare the features and functions that are told by the advertisement, at the end they decide which phone they will buy. From the example, we know in the procedure advertisements play a very important role and have big influence on person’s decision.

Record Drug Bust in Afghanistan

2008-06-11T19:35:00.002-05:00

In just one hit on Wednesday, the Afghan counter narcotics uncovered over $400 million dollars worth of hashish. Under six foot trenches, 260 ton of hashish was recovered in what is predicted to be possibly the biggest drug bust of all time. Hashish is a concentrated form of marijuana. To put it into better perspective, it is said that the hashish weighs up to 30 London double decker buses. Even though this sounds like a serious bust, the hashish is not even the leading produced drug in Afghanistan. Opium, is produced heavily throughout the country and just last year 9,000 tons produced were recorded. Over 90 percent of the world's supply comes from this source.
Recently, officials have given warning of crack-down on the opium production to farmers and instead cannabis plants have been grown. In result, the country has a second drug problem to battle.
Drug dealers across the nation have been arrested and the police have taken account for a large portion of the opium production across the lands. However, if such business is being targeted and shut down, how will these farmers survive? Much of their crop is illegal, and police officials are being killed through the raids. Is crashing such a large market worth the risk of lives? These drugs are produced in other areas across the world and although Afghanistan is currently a top supplier, would it not be just as easy to move the locations of production? With this bust behind officials, what is the best route to continue to follow?

Ethanol discussed at World Pork Expo// 10 Jun 2008

2008-06-11T09:59:00.002-05:00

It states in this article that Conservation Reserve Program acreage is being opened up to haying and grazing, this may be good for the farmers, but what is it's opportunity cost to the environment? If this land was originally set aside as reserve land it has probably been left idle and therefore will need to be modified to provide the best benefit to the animals it will be supporting. Modifications would probably include spraying undesirable plants, such as multi-flora rose, with round-up, then it will probably be necessary to reseed the entire area, because fescue is not very nutritious. Therefore the farmers will need to do a lot of prep work to the land before it will be viable for the grazing and especially the haying. The article doesn't state what kind of shape this land is in, but let's suppose that it is does require these kinds of modifications, what will this cost the farmer? Will the marginal benefit outweigh the marginal cost? I think probably yes, but I would wager that there will be some environmentalists who will try to stop this from moving forward. Something needs to be done to help the farmer out, lately it seems everything is against him, from soaring fuel prices to sky-rocketing feed bills. What are some other things that could be done to help the farmer out? Everyone needs to realize that without the farmer we, as a people, don't eat. It's as simple as that.

A Barter Economy

2008-06-11T07:57:00.000-05:00

In today's crazy society, with so many people who want to jump straight on the fast track to success, it is amazing to me that such a primitive form of trade can still exist in our economy. When I think of bartering, and I am sure many of you do to I think back to that of fur traders and Native Americans; or the old general store owner working with new frontiersmen. However, with the uncertain economy we live in today, many new businesses have been using this same concept to get things for their business, but instead of using money for payment, they in return performs services for the other person or business. This old-fashioned idea has actually stimulated the economy and sprung up new jobs through businesses that deal specifically in matching other businesses to barter together. This in effect keeps jobs alive, by saving these small companies money, they are better able to stay on stable ground, and perform a service to the community. Not only with the goods, they intend to sell, but also by creating jobs for local citizens, who in return spend money at other places who possibility bartered with their employer. This stimulates the economy in an area, which is what all businesses owners are hoping to achieve.

Food Is Gold, So Billions Invested in Farming

2008-06-11T06:01:00.006-05:00

One of the most important metarial to human is food. And the world's needs for food will greatly increase. After that, the opportunity cost will be increased than now. Therefore, a few big private investors are starting to make bolder and longerterm bets. I think this is the one example of comparative.

Huge investment funds have already poured hundreds of billions of dollars into booming financial markets for commodities like wheat, corn and soybeans. But a few big private investors are starting to make bolder and longer-term bets that the world’s need for food will greatly increase — by buying farmland, fertilizer, grain elevators and shipping equipment.

Wheat, corn and soybeans are important food in the world people. However, the supply of them is enough now. Therefore, the few investors are starting to investe to other metarials because wheat, corn and soybeans opportunity costs are not bigger than the others.

Fuel Issues for Airlines

2008-06-10T22:46:00.003-05:00

The average person is wondering how they are going to afford soaring fuel prices but what they forget to realize is the major fuel consuming industries and how they can afford these prices too.
Airlines are stuggling to find ways to save money so they can buy fuel. These airline companies have been working overtime and extra hard to find a way to pay for these soaring ful prices. Southwest airlines have decided that power washing the jet engines to get ride of the dirt and grime, using less water in the bathroom facilities, and updating the passangers seats with lighter ones will all benefit their fuel comsumption. They believe that all of these things will save gas which will decrease the amount of spending in fuel.
Forty percent of the ticket price goes straight to fuel expenses, while a couple years ago only fifteen percent went to fuel. Do you think there is a possibility that airlines will reduce flights because they will not be able to afford the price of gas after a certain amount of time? Do you think this is the perfect time to update airplanes with these new "fuel-saving" ideas? Do you think these ideas will actually cut the costs of fuel? Do you think summer travelers will spend more money in plane tickets than spending more money in gas for their own care knowing they are paying for fuel in both circumstances?

Apple Hides High Cost of New iPhone in Hidden Fees

2008-06-10T22:04:00.007-05:00

The critically aclaimed Apple iPhone is packed with games, internet, business advantages and tones more, but is it worth it? The new 3G iPhone that is going to be released soon has been said to be cheaper than the original iPhone. According to yahoo.com, the new 3G iPhone costs $199 but the basic voice service is upped from $60 straight to $70. The 2 year plan for the new iPhone is actually $1,879 compared to the old $1,839. Business users (biggest buyers of iPhone) get shafted big time, considering they have to pay $85 ($15 more than original iPhone) just for service. This "cheaper" iPhone will obviosly appeal to the audience that wishes to save money on the popular device but unsuspecting buyers will be slammed with high hidden fees.

Apple hopes to boost sales with a cheaper iPhone

2008-06-10T20:28:00.002-05:00

Although the Apple iPhone is a very cool new and technologically advanced invention, the price of the phone at the start is what some might call outrageous. The phone is completely jam-packed with capabilities but it sells for just as much as a person would pay, for a Playstation 3, or Nintendo Wii. So when a person thinks about buying such a thing costs, and benefits must be taken into consideration. Do you pay $ 399 for a iPhone, or the high end gaming system. Internet, talking and iPod capabilities that are portable, or a system with a blu-ray player and virtually all the capacity of the iPhone but stationary. In the increasingly mobile world that we live in today the iPhone might pay off for some people, but not me. Which is why Apple has decided to come out with a smaller gigabyte version of the iPhone with all of the same capabilities and a price of $199. For someone like me for instance now the judgment made at the margin might change because at that price you would not be able to afford a game system and the fact that the phone is now at a comparable price with other smart phones is definitely enticing. By lowering the price of the phone Apple has hopes to change the decisions that people are making at the margin.

Should Babe Ruth have been a pitcher instead of a hitter?

2008-06-09T13:28:00.003-05:00

Babe Ruth was arguably the greatest baseball player of all time. He was a prodigious home run hitter, swatting 714 over his career, most of them while playing for the New York Yankees from 1920 to 1934. Few people remember though that the Babe was also one of the best pitchers in the game prior to joining the Yankees in 1920. Pitching for the Boston Red Sox from 1914 to 1919, Ruth helped the Red Sox win World Series in 1915, 1916, and 1918. After his contract was sold to the Yankees before the 1920 season, the Yankees decided to use Ruth primarily as a hitter. The rest, as they say, is history.

In terms of economics, what economic concept best describes the Yankees decision to use Ruth as a hitter rather than a pitcher? For a hint, click here. (Scroll down to read it all.)

Feeling the strain of increasing fuel prices

2008-06-07T12:43:00.001-05:00

The constant rise in gas prices at the pump can make people feel stressed and alone, however everyone is in the same predicament. Even large corporations are feeling the strain of increasing fuel prices Continental Airlines Inc. was force to take drastic measures in order to compensate for the rising price of fuel. The airline reported that they plan to lay off 3,000 of their employees and eliminate nearly 8% of their fleet. Continental did state that they plan to continue to pay the 3,000 employees remaining salary throughout 2008. Continental is predicting that the cost of fuel will be over 2.3 billion dollars more than in previous years. These are the details discusses in the article Continental to cut 3,000 jobs, slash capacity, flights. Now lets discuss what types of models and economic ideals that may have been used to determine how many people to lay off and how many flights to ground.
Continental could have created a model which showed that it would be cheaper to pay the 3,000 employees that are being laid off their remaining salary for the rest of the year then to have them up in the air working. Continental along with numerous other airlines have created models to show the overall expenses for each flight and the number of flights to determine how many flights they can have in the air before it becomes uneconomical or when the marginal cost becomes greater than the marginal benefit.

Days of the Oversized American Vehicle Over?

2008-06-05T16:20:00.004-05:00

As many of you might already know, General Motors announced Tuesday that it was shutting down four of its plants that produce large sized trucks and SUVs. Why is it doing this? High gas prices primarily. It is no longer profitable for auto makers to mass produce these gas guzzling machines. The target market for these types of autos is drastically decreasing with every passing day. America has been very lucky it has taken it this long for gas to become as high as it is. European countries that share many of the same economic freedoms and prosperity as we do have little or no market for SUVs and pickup trucks. Although there are many reasons one giant one is the fact that their gas prices have been at the 4 dollar mark and higher for many years now in some countries. As consumers look for more fuel efficient vehicles, the SUVs and large trucks are being taken from the showrooms and front lots and taken to the back lots and small 4 cylinder cars and hybrids of all kinds are being pushed into the spotlights. So the question is simple, are the days of the SUV and heavy truck finally nearing an end in the United States?

Is it rational to ignore some costs?

2008-06-04T20:07:00.003-05:00

After reading Chapter 7 you will have been exposed to the basic paradigm in economics--namely, the rational man (homo economicus) model. The model posits that much of human behavior can be explained as if individuals made their day-to-day decisions by comparing the marginal benefits and marginal costs of various activities. For example, consider the decision facing a customer at Burger King. Let's imagine that our rational man has already consumed one Whopper. Should he buy (and eat) a second Whopper? Well, if the marginal benefit of another Whopper exceeds the marginal cost, then it is rational to gobble up another Whopper. What about a third Whopper? I suspect that at some point the marginal benefit of an additional Whopper will start to decrease (how much happiness can a third Whopper possibly give you?) such that it's not "worth it" to buy another one. Thus, the marginal benefit/marginal cost rule tells us "how much" to do of something. Namely, continue the activity up until the point where MB = MC.

Marginal analysis, by its very nature, is forward-looking. A rational individual is always trying to compare the additional benefits versus the additional costs of her behavior. Not all costs, however, show up in the future. Some costs may have been incurred in the past and, consequently, are unavoidable. These are called sunk costs. According to homo economicus, sunk costs should be ignored.

Read the following episode from the life of Alex Tabbarok Do you think Alex made the right choice?

What are some other examples of sunk costs that people ought to ignore if they wish to emulate homo economicus? Can you point to anything from your own personal experiences?

Freeconomics?

2008-05-27T09:54:00.004-05:00

Rarely do I come across a business press article that introduces (and applies) as many basic economic concepts as this one by Chris Anderson. Anderson makes the case that the internet (and the digital economy in general) has fundamentally changed the way businesses do business. In a digital economy, according to Anderson, competition necessarily drives prices to zero. Thus, the price of music, software, and movies, for example, will essentially be "free."

The notion of a free good is alien to most introductory chapters in a typical economics text (such as your Krugman text). As Milton Friedman is famous for saying: TANSTAAFL! The basic argument against the concept of "free" is that we possess unlimited wants yet live in a world with scarce resources: to get more of one thing requires us to give up a little (or a lot) of something else.

Read Anderson's article and tell me if you agree or disagree with his main thesis. If you agree with his idea, can you come up with your own example of a product or service that will eventually be priced at zero? Explain why. If you disagree with his idea, can you explain what the "hidden price" is of the various examples he gives in the article?

Hat tip to Newmark's Door for the article.

Stadium: A Public Cost for Private Gain

2007-12-06T23:05:00.000-05:00

A big reason for the current fire sale of talent in the Florida Marlins is due to their demand for a new stadium.

http://www.ballparks.com/baseball/national/miabpk.htm

This link shows the proposed plans for a new stadium in Miami and of course the owner of the Marlins wants the city of Miami to pay for $198 million dollars, provided by the tax payers of the city. Now it is believed by some that having a sports team provides no new economic growth and that there is a fixed amount of money in an economy and people will spend it at other places within the city if the sports teams leave. Well then why can the owners expect the city to pay for such a large part of it when there is no significant economic boom after? I’m sure there are better things that the almost 200 million dollars could go to in the city of Miami. Also, new stadium or not Miami isn’t that great of a sports town. Attendance at a game this past season was under 1,000 people, more people came to Schaly Stadium for community day. Although the stadium would be nice to have is it really needed, or wanted?

A-Rod's Dollars Make Sense for Yankees

2007-11-28T22:38:00.000-05:00

It is the largest deal in professional sports history, and both A-Rod and the Yankees stand to get significantly richer because of it. A-Rod is likely to generate $450 million of "value" for the Yanks. Assuming they will exceed the luxury-tax threshold in each 10 years and face the 40% tax, the total cost for Rodriguez will be $427 million. The true economic value of A-Rod is based on the Yankee's growth and his Marginal Revenue Product. The article talks about other places the Yankees could have spent their money, broadcast revenues, increased ticket prices and demand for games. All of these topics are because of Rodriguez. After our class discussions, what is everyone's opinions on one of the biggest sports contract to ever exist.

Tampa Bay to Get New Ballpark?

2007-11-14T20:21:00.000-05:00

Despite money woes that have lawmakers scrambling to pay for state programs, Florida Govenor Charlie Crist said that he thinks the state should try to figure out a way to help the Tampa Bay Rays build a new waterfront ballpark in St. Petersburg. But how?
Earlier this month the Devil Rays announced plans for their $450 million open-air, waterfront, downtown stadium. Crist has stated that he will do whatever he can to help the process move along smoothly. He claims that the new stadium will result in economic growth for Florida and create "jobs, jobs, jobs for a lot of people." It seems that argument of new jobs is always used, but as we have learned, not as many jobs are created as people may think.
Currently, the Devil Rays play in Tropicana Field which does have a roof. However, they envision a 35,000 seat stadium on the current site of their spring training facility.
What do you think would be an appropriate way to fund the new stadium? Should they tax cruise-ship passengers and try to put the tax on out-of-town visitors (rental cars, etc) or should they simply just have the citizens pay for it? What about Crist's argument of the new stadium resulting in economic growth and jobs?

Teams bring more than money to a city...

2007-11-06T10:05:00.000-05:00

Taking an Economics of Sports class and learning about the various financial effects of a sports team on the city they represent has got me to thinking. I know that a real Economist is only concerned with the bottom line, the final number, but I think that the effects of sports teams go beyond what can actually be measured by a calculation or number. Last night I attended the Pittsburgh Steelers vs. Baltimore Ravens game in Pittsburgh. I have attended many of the games at Heinz Field this season but each time have been more crucial of the economics side of the business (or team) that I was rooting for. Could they cut costs there? Should they make a bigger stadium? Why don’t they charge more for that? The list goes on. Last night however when I was standing in the parking lot 4 hours before the game drinking the legal beverage of my choice I realized that, at least in Pittsburgh, Steelers are about so much more than just a business. The effects of the team’s winning percentage are irrelevant to the atmosphere before the games, people from all walks of life come together to have a great time, to relieve the pressures of day to day life and the 64,546 people that packed Heinz Field last night experienced a type of emotion that is difficult to describe. Now last night’s game was an exceptional example considering the Ravens served the Steelers the win on a silver platter, but the effects are still the same. As I stopped at a rest area during my trip from Pittsburgh to Marietta at about one o’clock in the morning I realized that nearly every car in the Ohio rest stop were full of Steeler fans. Terrible towels, Steeler flags, logos, jerseys and more colored the rest area black and gold. I just think that to say that a few quick calculations could measure the true financial effects of a team on a city would be ignorant. Now of course, I am obviously a Steeler fan, and a Economics minor should I be able to separate emotion and passion for a team apart from the business side of the game? Maybe I should be able to, but I simple don’t think that it’s possible to do.

Baseball Stats Inspire Sports Economists

2007-11-06T00:14:00.000-05:00

How do you become a sports economists? What 9 year old says I want to be a sports economists when I grow up? Most say I want to be a baseball player or football player, but not very many people get to make it professional. True sports fans have a numerical obsession that gages how well a player is hitting, throwing, or shooting. These stats are looked over and talked about every season, but unfortunately there aren’t too many careers that involve memorizing stats and analyzing. However there is an alternative career that involves numbers and sports and it is being a sports economist.

http://www.usatoday.com/money/2006-07-27-sports-econ-usat_x.htm

Former Former Federal Reserve chairman Alan Greenspan admits learning mathematics using baseball stats and current chairman Ben Bernake isn’t any different. The link above discusses more about why there is an increase in interest and the new audiences sports economics is grabbing the attention of.

Smaller Stadiums; are they good or bad for the viewers?

2007-11-05T14:42:00.000-05:00

It is obvious that stadiums are getting smaller these days. In fact, in the past decade, the Seattle Mariners are the only team to have built a larger stadium than the one before it. At www.foxbusiness.com, they say that the reason for this is to be more like a nightclub. If the club is full, more people will come, even if it is full only because it is small. The owners want the stands to be full, because they don’t want the people at home watching the game to see the empty seats. The smaller stadiums are good to the fans, because they have larger seats that are closer to the field, wireless internet available, and more concessions available with smaller lines. All of these facts look good to the consumers, except for the fact that because of less seats, the price of seats will go up. Fans will also have the disadvantage if they like to decide to go to games the day before, or the day of, because tickets might be sold out. So, is it better for the fans to have smaller stadiums? I think it is better because if you plan ahead and pay a slight increase in ticket costs, the advantages of having smaller lines for food and larger seats will be worth it.

Teams pack up and leave (is that bad?)

2007-11-02T11:36:00.000-05:00

It would be logical to think that a lockout by team would be bad for the local area around stadiums. With no games consumers would have less reason to visit the area. Also that a team leaving the city (for any reason, like lack of a new staduim) would have a heavy impact on the cities economy. However, its seems to be quite the opposite. During the strike of the NBA from 1998-1999 there was almost no impact at all. In fact a team leaving a city didn't even impact the economy the next year. This suggest that consumers will spend their dollars on something else, perhaps a different form of entertainment or maybe some other luxury. So does the threat of leaving if a city won't back the creation of a new stadium carry any weight, or is it the empty threat of desperate entity?

TBS Has Record-Low NLCS Ratings

2007-10-16T19:11:00.000-05:00

After our discussion in class about broadcasting revenue, I thought this article was interesting. TBS, which is now carrying more than just Atlanta Braves games, isn't drawing a large crowd for the playoffs. The National League championship series had all the elements of a low-rated sporting event: a sweep involving two smaller-market, tradition-poor franchises. Why would anyone think that the ratings would be higher? The Rockies four-game sweep over the Diamondbacks drew a 3.3 rating for homes with TBS. The previous low average NLCS rating was a 6.2 for the Mets' five-game victory over the Cardinals in 2000. Why the big difference? Even though they are smaller teams, it's the playoffs. This is where teams are supposed to bring in extra money. However, Tuner Sports said network executives were "still very, very happy" with their seven-year deal with Major League Baseball despite the low NLCS ratings in their first year airing the playoffs. President David Levy is still optimistic. He said that broadcasting all the division series games on the same network helped attract viewers by eliminating confusion. Which could be very true. Were the ratings low because both contenders were small-market teams? Why wouldn't the playoffs draw more attention and demand?

Real Madrid the Yankee's of soccer

2007-10-16T13:20:00.000-05:00

Baseball isn’t the only sport where teams attempt to buy a championship. Take a look at Real Madrid a Spanish soccer club. Real had over $200 dollars of revenue in the year 2002, and only made $10 in profit. Where’s it all going? You guessed it into the top notch players they buy from everywhere. Take a look at the roster. Ronaldo (world player of the year, current record holder for goals in a single world cup, world cup champion), Zinedine Zidane (2 time world player of the year, widely regarded as the best center midfielder to ever play period, was the highest paid player in sports prior to A-rod, world cup champion, Euro 2000 Cup champion), Luis Figo (2 time world player of the year), David Beckham (prior to move to the US, Beckham was the world player of the year and international icon). So what does it all mean can you buy a championship? Why yes you can…Real won the Spanish league in 2003, winning for the 29^th time and club history. That’s 3 more time than the Yankees, and they were founded just 1 year before. With all the power Real commands in Europe they sell jerseys for $65 a pop. That’s about $15 more than the Yankees. But does all this winning ruin the sport of soccer in Europe? Not quite. Real’s stadium holds 17,000 more people than Yankee stadium, it being one of the smaller stadiums in even in the country. Oh yeah its been sold out for the last 10 straight seasons (to every game)…

Forecasting the Winner of the Nobel Prize in Economics

2007-10-06T16:40:00.000-05:00

The Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel (aka the Nobel Prize in Economics) will be announced on Monday, October 15, 2007. Of the 58 men who have won the award outright or shared in it since the prize began in 1969 (no woman has yet to win it), 38 have been Americans. The leading university homes of the winners include the University of Chicago (9), followed by Columbia (4), Harvard (4), University of California-Berkeley (4), and Cambridge University, England (4).

Now, let's see how well you can forecast. I will award 2 bonus points to the first person who correctly forecasts the next winner of the Nobel Prize in Economics. Your educated guess must be posted as a comment to this post before the Nobel Prize announcement is made. In the event that more than one person submit identical guesses, the earlier timestamp of the comment will determine the winner. The bonus points will be added to the winner's next exam score following the Nobel announcement on October 15.

Enter your comment by clicking the comment button at the bottom of this post. If you are not a member of Blogger you must choose an Identity: choose "Other" and put in your real name. Click "Publish Your Comment" when done.

Will/should the NFL move to a 17 game regular season?

2007-09-24T23:27:00.000-05:00

The NFL Commissioner, Roger Goodell, stated on April 26, 2007 that the NFL has been thinking about adding a 17th game to the regular season. He said that if this idea goes through, they would probably drop a pre-season game. This option sounds like a good idea, but is it from an economic viewpoint?
There are many factors that will determine if an additional game will be a good idea or not. For instance, an increase in regular season games might only increase games in foreign countries. If this happens it will add profit to the NFL, but not to the individual teams and fans. If the extra game is played in the states, the fans will benefit by being able to watch another game, the players will benefit by getting a much higher salary in a regular game compared to a pre-season game, and the franchises will benefit by making a better game-day profit. The only problem is if the players’ salary increase were to be higher than the game-day profit. If this would happen, everyone would still profit except for the franchises. This probably will not happen because the demand for football is so high, that only one more game will still have the same demand as having a 16 regular season schedule.
So, should there be an additional regular season game? I say yes, but make it be in the United States, so we all can benefit from it.

Tribe Competes for Best Record in A.L. with One of the Smallest Payrolls

2007-09-24T23:12:00.000-05:00

This past weekend the Cleveland Indians clinched the central division title for the first time since 2001. Now they are playing for home field advantage in the playoffs, were the team stands to make more money on gate, merchandise, and concession revenue while still paying much less salary to their players compared to Boston, New York and Los Angeles. http://sports.espn.go.com/mlb/teams/salaries?team=cle ranks the teams in MLB by salary this year and the Indians are 23rd out of 30 teams. Only San Diego (24th) is contending for the playoffs with a lower payroll. However, it has been 5 years without a playoff appearance for the Indians while the teams with the highest payrolls such as the Yankees, Mets, Dodgers, and Red Sox seem to always be in the race for a Pennant. There even seems to be a correlation with playoff appearances by teams and their salary. Yankees pay almost 4 times more then small market teams like Cleveland and San Diego, but as a result make the playoffs four times as much? Can a small market team compete year in and year out, or do they need to rebuild after a good run of 5 years or so? I think it would be better for MLB if every team made the playoffs equally to create excitement in these smaller markets and to stop “evil empires” from monopolizing the playoffs.

The Fed Rate Cut vs. Inflation Fear

2007-09-24T20:26:00.000-05:00

The Federal Reserve cut the target on a key short-term interest rate by half of a percentage point to 4.75% last Tuesday. On the same day, the Fed also cut its discount rate by another half of a point to 5.25% after the surprise cut on 8/17/07. It is clear that the Fed is willing to take any moves necessary to ensure that the US economy is not derailed by problems in the subprime mortgage market. The federal funds rate is an overnight lending rate that banks charge each other. The rate cut is a very important tool because this funds rate influences the amount of interest consumers must pay for various types of debt, such as credit cards, home equity lines of credit and auto loans. The Fed is “intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”

Stocks surge after the Fed announcement of rate cut. The risk of potential inflation starts to catch people’s attention. Inflation could come from the still-booming global economy and from the lower rates, which push more money into the economy, making it easier to raise prices. In the statement, the Fed indicated that more rate cuts could be on the way. Do you think the Fed might cut rates too much? Are we expecting inflation now? I remember that the Fed had to raise rates in 1999 after cutting them during the 1998 financial crisis and the economy ended up in a recession in 2001. Do you think the same thing is happening now?

GM Walkout: Union Fringe Advantage?

2007-09-24T19:46:00.000-05:00

United Auto Workers (UAW) walked out across the US in the first strike at General Motors (GM) since 1998. The two major issued as the two sides negotiate a new national contract: whether the UAW, having made big concessions on health care, should get some kind of jobs guarantee from GM. The GM management and UAW leaders held several bargaining sessions, trying to come out with a deal that would set up a huge, union-led health-care trust to assume retiree medical benefits and address a slew of other economic issues. Apparently, the two sides did not come to an agreement.

As we notice, the union wage advantage is an estimated 13 percent over their nonunion counterparts. This advantage rises by 2 to 3 percentage points when fringe benefits are considered. Here comes the question: why do union workers enjoy a greater variety and higher overall level of fringe benefits than nonunion workers?

First, union fringes may be higher because the union is able to deprive management of its workforce and the employer is willing to pay both higher wages and larger fringe benefits to avoid the costs of a strike. Second, union workers, by virtue of their higher earnings, may simply choose to “buy” more fringes than lower-income nonunion workers. Third as a collective-voice institution, a union may formulate fringe benefit proposals, inform its constituents of the details of such proposals, and crystallize worker preference. Fourth, older workers are usually more active in the internal politics of a union and therefore more influential in determining union goals.

What do you think about unions? Do you think unions are a positive or a negative force insofar as economic efficiency and productivity are concerned?

Seattle Supersonics; An Attempt to Trump Local Government

2007-09-24T18:35:00.000-05:00

Seattle officials filed a lawsuit against the SuperSonics to prevent them from leaving town this Monday. The franchise has claimed arbitrary losses since the 1990's, and the losses of the 2007 fiscal year will exceed seventeen million. However, the Sonics had previously agreed to a fifteen year lease to play the rest of their games at the KeyArena, the smallest venue in the league, which will be up in Sept. 2007.

The Sonics are trying to exploit their losses in revenue to the media, and use it to their advantage in an attempt to have a pricey new $500 million stadium built in Seattle. The franchise is claiming they have to pay unfair amounts of the revenue they are generating to the city. The team is trying to buy up the remainder of the lease in order to get out of their agreement and move out of the city. This would hurt the overall fan base for the Sonics, which is relatively small compared to other franchises because of the poor quality over numerous years in the league.

The franchise is trying to present an ultimatum to the city of Seattle. If they do not get a new stadium, they are threatening a move out of the city, causing a loss of revenue for the city as a whole. This would interfere with the markets of other regions in the country if a move was made. However, the local government is stepping up, and putting pressure on the franchise to remain loyal to their lease for the small amount of time they have left to fulfill it.

More Apply for Jobless Benefits

2007-08-14T12:14:00.000-05:00

Recently, the labor department released the data of new applications for unemployment insurance. By August 4th, the application increases to 316,000, the highest point since late June. However, claims are still lower than one year ago, which is 319,000. The government also reported the nation’s unemployment rate of July. It was 4.6 percent in July, the highest in the recent six months, indicating new job creation is slowing down.
The unemployment insurance reminds me of the decline of unionism. Since 1960s, the percentage union members in the US are declining all the time. Besides the structural changes and managerial opposition, substitution effect is another important factor. Many of today’s public programs provided by the government were only available to workers through unionization, so employees of today do not have to join the unions to enjoy these benefits. Still, unions can bring some other benefits such as a higher wage, so to join or not to join the union is really a personal decision.

The Black Market and College Furniture

2007-07-31T07:18:00.000-05:00

College kids have used stolen milk crates for decades as building blocks of coffee tables and dorm room shelves. Now, people are cashing in by swiping thousands of the containers from loading docks and selling them to shady recyclers. The containers are chopped and shipped to China to be made into a variety of products. This represents an estimated $80 million in losses from the thefts. Dairies across the country are moving to stop the plastic pilfering. In California, companies are even hiring private detectives and staging sting operations.

"We saw them disappearing into this black hole," said Rachel Kaldor, executive director of the Dairy Institute, a trade group in Sacramento. "We just don't know who's stealing these crates off the loading docks."

In the past two years, the high-density plastic has joined a list of materials that are being stolen and sold via a thriving underground recycling network. Thieves target copper, aluminum bleachers, beer kegs, even cemetery vases and nameplates.

It took a while for dairies to determine what was happening to their crates.
"If it were just college kids taking them, the dormitories would be overflowing with milk cases," said Stephen Schaffer, general manager of Alta Dena Dairy near Los Angeles. The crates are made of petroleum-based plastic that has increased in value along with gasoline prices. The material now sells for 22 cents a pound, compared to 7 cents a pound in 2005, said Patty Moore, a recycling consultant in Sonoma, Calif. Consumers can spend as much as $10 for an "authentic" dairy crate at retailers such as the Container Store. Dairies pay about $4 when they buy in bulk.
Last year, the industry lost about 20 million crates to thieves. California, the nation's largest dairy state, has taken the lead in the fight against plastic poachers. Wood hopes the busts encourage college students and homeowners to voluntarily return any stolen milk crates they might be using. Alta Dena's has even set up a "milk crate abuse" hotline at (800) 457-6688 for people to surrender the containers, no questions asked. It shows that illegal undocumented black markets really do exist. There can be a market for anything. Most often, we just think of black markets as drug selling murder rings. Well, milk crates count also.

Airspace a private good

2007-07-31T03:28:00.000-05:00

The tragic story of the two news helicopters colliding in Arizona during a high-speed police chase demonstrates how airspace can be viewed economically as a private good. Air traffic control acts as a supplier of the good. The good is excludable because air traffic control must clear crafts to fly in the area. The air is rival in consumption because only one aircraft can occupy a particular unit of air at one time or tragedy will ensue as did in this story. What is considered a unit of air can change what category the good would be considered. If the unit of air is the entire airspace that air traffic control allowed the aircrafts to occupy, then more than one person could use that unit at the same time making the airspace an artificially scarce good.

Live Earth: Harmful...or Beneficial?

2007-07-30T22:02:00.000-05:00

Some of you may recall that there was a series of concerts that took place in early July to benefit the environment, even though it wouldn't surprise me if you are scratching your head saying...what concerts? Anyways, Al Gore and a bunch of celebrities/music artists decided that it would be a nice idea to hold a series of concerts in different places around the world to "spread awareness" about the environment/global warming. The article gives some more specifics on the events that took place. Anyways, I have been sitting on my opinion of these concerts for a long time. While I understand their intentions, I question whether or not the benefits outweighed the negative outcomes. Now, the negatives of all of these shows would be the amount of fuel the artists wasted with their tour buses and planes, the electricity the concert was fueled on, the security, the money spent on fancy bottled water and random foods demanded(have you ever seen what some of those artists demand in their dressing rooms?) the artists drink and eat, the fact that they are wagging their fingers at me for taking a ten minute shower even though they drive a Hummer or Escalade which causes a certain feeling of nausea in my stomach.....but Al Gore swears up and down, as do many other green thinkers, that the "awareness" that was spread will outweigh these costs. Now, correct me if I'm wrong, but just because you tell someone something, it doesn't necessarily mean they are going to act upon that information. I can tell you we have class at 10 AM on Monday, Wednesday, and Friday, and you are aware of it, but you decide that staying in your room playing video games is worth more than your class. Another claim was that the concert "wasn't meant to just make changes for the general public, but to inform the lawmakers and activate their awareness". I just feel like this whole save the environment campaign would have worked better with a small, grassroots movement style. Concerts with thousands of people are VERY impersonal. Plus, if it is your favorite band, singer, or actress, you don't give a blast what they are saying--you're into the music! Adrenaline is pumping, you're waving your hands in the air, jumping like a puppet on a string...you aren't REALLY listening with full concentration (it is nearly impossible to with all the other people screaming around you anyways). I think by traveling the country/world (by bike or something more environmentally sound-maybe three bands could have fit into a plush tour bus instead of one) playing acoustic shows, doing volunteer work with communities, or holding autograph sessions and speaking about the environment, would have suited this kind of message a lot better than these concerts.

What do you think of the Live Earth Concerts? Did the costs outweight the benefits, or vice versa?

The economy of luxury

2007-07-30T19:38:00.000-05:00

The Emporium is getting ready to celebrate their 10th anniversary. The Emporium is a large department store which carries all of the latest designers and fashions.
The senior managing director in charge of the Emporium explains how nothing comes easy but by pushing your idea and finding a level playing field with your shareholders you can be very successful. He managed to get a store placed in Thailand which he said was very hard work considering that his partners didn't think that it would do good. But because he researched his plan he found that the area would be a success, and now that 10 years have gone by he was right.
Another move that he made was by personally going to the clients he wanted on board with him. while Louis Vuitton and other clients turned him down, Chanel got on board with him. That was all it took because right after they took it one, the others followed.
He explains that you must start in moderation and then grow. But to be efficient in any economy you cannot grow too rapidly or you will lose your footing and your idea will collapse.

Northwest Airlines Canceled Flights

2007-07-30T16:50:00.000-05:00

http://money.cnn.com/2007/07/30/news/companies/northwest_canceled_flights/index.htm?cnn=yes

In the attached article concerning Northwest airlines, the author talks about the high percentage of canceled flights due to the number of pilots calling in sick. He goes on to explain that the reason pilots are calling in sick is because they are afraid they will hit the maximum number of flight hours allowed by the FAA too early in the month. This action by the pilots has caused an 8% cancellation rate of scheduled flights and a 6% decrease in Northwest stock. I wonder if the airline has considered its marginal cost and the cost of hiring more pilots verses the cost of bad business?

Hershey’s Profit Falls on Cost of Job Cuts

2007-07-30T07:07:00.000-05:00

According to New York Times, the largest US candy producer, Hershey, its second-quarter profit fell 96 percent due to the elimination of jobs and higher dairy costs. The net income dropped 41 cents a share compared to a year earlier.

In the article, it says “the elimination of 1,500 workers and the transfer of some operations to Mexico cost $124.4 million before taxes in the quarter.” I do understand the transfer of equipment will cost a lot to the company, and I think moving the manufacture to Mexico just fits capital flows theory. Because in Mexico, the wage rate is lower than the US, capital flows can help reduce the labor costs. However, I am not sure why the elimination of workers will cost money too, and it seems this cost is not small.

Hershey is trying to make profits despite the temporary loss. “We understand the missteps over the past few quarters and we are aggressively addressing them,” Richard H. Lenny, the chief executive, said.

Gas Prices Down

2007-07-29T20:12:00.000-05:00

As most of us have notice gas prices have been going down this summer. This can be contributed to the fact that American refineries have started to reopen and up the production levels. However, with companies out trying to make a penny over paying at the pumps will still occur, due to the fact that it is summer and people are going on vacations. As more and more people start travailing and companies are cashing off on this perhaps this is also another indicator the the economy is recovering. Over the summer so far gas prices, depending on where you live, have dropped by about 30 cents thanks to the fact that the America Midwest refineries are recovering and producing more.

Ranchers, farmers battle over corn

2007-07-26T21:50:00.000-05:00

Discussing an ongoing battle, corn has spiked due to the Ethanol battle from $2.50 a bushel to over $4.00 earlier in the year. On Tuesday corn delivery was at $3.12. The higher corn prices are leading to higher feed costs for many farm animals. The prices are also leading to less grazing land and higher costs for land as it is being converted to acres to corn. Where is the feed going to come from and what is going to happen to our competitive position internationally? These are among many questions that are being asked by Jesse Sevcik of the American Meat Institute as she notes that the livestock sector is losing its position to ethanol as the main consumer of U.S. corn. According to the Renewable Fuels Association, more then 120 ethanol plants are now in operation and 76 more are being built or expanded.

Cattle producers can use a variety of feeds, but other things like soybean and hay have also risen as farmers are using more land for there corn. Several other prices are higher due to the corn increase. Milk prices are up 10% from January, beef and pork prices are up 5%, and poultry are up 6.5% according to the Labor Department’s consumer price index. For pork and poultry producers, “an increase to $4 from $2 in the price of a bushel of corn and a jump from $120 to $260 per metric ton of soybeans translates into roughly a 30% increase” says Michael Swanson, an agricultural economist at Wells Fargo. For consumers, meat, milk, poultry and eggs make up about 20% of a families food budget. Also Cereals and grains account for 8%.

A website sponsored by cattle, beef, dairy, poultry and egg producers focuses on the side effects of the booming ethanol market. I encourage everyone to look at the website and read the articles because it is very interesting.

balancedfoodandfuel.org

Minimum wage hike kicks in Tuesday

2007-07-26T20:54:00.000-05:00

A minimum wage increase affected 20 states on Tuesday. This was the first in a series of wage increases. The wage increased from $5.15 to $5.85 on Tuesday and will increase on July 24, 2008 to $6.55 and then on July, 24 2009 it will raise to $7.25. The last wage increase was in 1996 and 1997 and was a two step increase. Because there are 30 states that have a minimum wage that is already above the federal wage only 20 states were affected by the increase. According to the Economic Policy Institute more then 70% of workers already worked in the states that were not infected by the increase.

The director of the labor law policy at the U.S. Chamber of Commerce, Marc Freedman says “the higher federal minimum wage could mean fewer hours, fewer pay increases for other employees, benefit reductions, job losses, and waning job creation”. “In particular, in the small-business sector where companies have restricted cash flow, any time you have arbitrarily increase labor costs, they have to cover the costs in some ways.” Freedman also says “They have to pay more and get nothing out of it.” So would you say that this is an external benefit?

Ohio minimum wage is $6.85

West Virginia minimum wage is $6.55

Pennsylvania minimum wage is $6.25

Back-to-school pricetag: $18.4B

2007-07-22T18:19:00.000-05:00

Back to school price merchandise is estimated to rise to 18.4 billion dollars this summer from a 2006 price of 17.6 billion. A large contributor to the price increase lies largely in the new and advanced technologies. New computers, music players, and cell phones are contributing a lot to the increase. Families with student are expected to spend an increase of 6.9% more on school supplies and 13% more on new gadgets year than in 2006 according to the National Retail Federation’s back to school survey.

Not only is electronics expected to rise, but also shoes and clothing sales are expected to increase this year. Also, because of the up-rise in the price of gasoline many families are planning to finish there back to school shopping on the net. This number is up 15.2% from last year. Many families are planning to shop at discount store rather then specialty store or department stores.

Throughout time, electronics have turned from luxuries to necessities for everyone. Parents are also investing a lot of money into learning tools such as laptops, educational software, printers, and books to help support their children’s learning experiences. The one thing that this article does not talk about is the amount of money that it costs to go to school. It seems to me that they price keeps increasing, but is there a point that the price of college has become overwhelming that kids and there parents will not be able to afford it. The next time you are begging your parents for that new iPod or new cell phone take a second and think about if you really need new apple iPhone or the new 80 GB video iPod or if you could settle for something less.

More then half of teens forgo summer jobs

2007-07-22T18:13:00.000-05:00

For the first time on record, most U.S. teenagers are not or have not been looking for summer jobs. Many teens are forgoing traditional work at camps, pools, and ice cream stands. The Labor Department stated that teens, 16 to 19, are not looking for jobs in June 2007 (48.8%) which is down from the number in June 2006 (51.6%). The reason for the increase is said to be that more teens are spending time studying. The number of students in June 2007 is up form June 2006. So are students realizing the fact that a good education is important for their future or are teens having to take classes over because they didn’t put forth enough effort? A statement from Daniel Sullivan, an economist at the Federal Reserve Bank of Chicago, says “The value of school is higher than it used to be.” Also, “Students are accurately seeing that a good education has become more important for their careers and future wages.”
Because of the strong stock market gains, household net worth has increased which has given parents the ability to save more money for their children’s education. Therefore, teens do not have to work as much to save money for college. Another reason for teens not looking for jobs is the competition with older worker and foreign immigrants. Some teens feel as if it is not worth it because they will not get a job, so they just give up. So the teens that want jobs are having trouble finding them.
Some economists say that the kids that stay in school will benefit themselves and the economy. They believe that the more educated they will be in the work force the more productive they will be in the end. A professor from the University of Minnesota says “working moderate amounts during high school helps teens not only learn skills such as how to work with others, but also helps develop self-esteem.
When I was in high school I chose to work where ever I could just to have some money to spend. I question the fact that more kids are studying during the summer then being lazy and not working, especially at the age of 16-19.

New Fuels Looks Hopefull

2007-07-16T15:56:00.000-05:00

Throughout reading this article it reaches out to me being a Petroleum major that new fuels are the future. Petroleum will remain a huge part of the fuels around the world and that wont change, but on the other hand we will start having a increase in alternative fuels such as the biomass's that the article speaks of. This will help cut down on some of the prices of oil since the demand might decrease. I think we will always have industry in foreign lands simply because we have to go where the oil is and if its out of this country were going to go get it. I do think that the alternative fuel idea is in genius considering most of the major oil company's have already taken to it. I have worked for Chevron and Anadarko Petroleum corporations and I can clearly see that they are pushing for finding better ways to create alternative fuels that are more and more efficient to the economy and environment.

Market share and the " Big Three"

2007-07-15T21:02:00.000-05:00

Before the 1970s, the United States basically dominated the automobile market. The big three include General Motors, Ford, and Daimler Chrysler. In 1962, half the cars sold in America were made by GM. Now its market share is roughly 25 percent. In 1999, the Big Three had a 71 percent market share. According to the Washington Post, their share is now 58 percent and falling. Twenty-three percent of those working for auto companies in North America now work for companies other than the Big Three. GM says its health care package, negotiated with the United Auto Workers, puts it at a $5 billion disadvantage against Toyota. Japan's government, not Japanese employers, provides all health care in Japan. This could lead much of corporate America to push the federal government to assume more health care costs. This would be done in the name of "leveling the playing field" to produce competitive"fairness." Every dollar GM spends on health care cannot be spent on developing cars, like hybrids. We know that any large market share and limited competition is not true competition. How would you define this "competitve fairness?" The Asian motor companies that are in the market are a part of these woes. They had easy entry into the market and are able to produce cars at lower total costs. GM and the other American companies are held down by the expensive packages the unions require. Should we save American automakers by raising taxes to fund universal health care, or is GM over its head? This problem sounds like a web of slippery slopes.

Thirsty? Bottled water industry booms....

2007-07-15T13:49:00.000-05:00

In what would seemingly be a perfectly competitive market, some producers of bottled water have found ways to make their products more unique, individual, and attractive to the market--causing high prices along with high sales for bottled water. At the cafe featured in this news clip, the best selling bottle of water is 30.00 a bottle, and the most expensive bottle of water is 55.00! So what is the big deal about this bottled water? I can turn on my tap and easily get drinkable water. According to the taste test, apparently, 3 out of 4 preffered the "expensive" water over the tap water, though. As far as health is concerned, the benefits of bottled water vs. tap water are still under debate, so why do you think so many people are willing to spend so much money on a simple bottle of water?

Applied game theory useful in online marketplaces

2007-07-15T12:45:00.000-05:00

In today's society companies are getting ahead by using a Game Theory. This game theory helps companies to see what strategy another company is using so they can play against it.
A company called DUBAI is an international organization that is expert in the application of game theory to e-market design and e-commerce.
Ebay is one of the largest participants in this theory. Bidders will wait until the last minute of an auction in order to place their bid. This is because they know they have a better chance in getting what they are bidding on, due to the fact that no one will be able to place another bid. However the bidder doing this has to think in the eyes of other bidders in order to out bid them at the last minute.
Now a days there are companies that will watch an item for someone so that they don't have to constantly stare at a computer screen. The companies to the last minute bidding for the client in order to assure their client gets the item they want. This kind of theory is known as Sniping.
If companies are going to start using this sniping method in order to get ahead in their business, they will undoubtedly get ahead, but the question is for how long. There is only a certain amount that a company can do without using another approach.

Can companies compete when marginal costs are zero?

2007-07-11T10:05:00.000-05:00

In this section of the course you are learning about the profit-maximizing behavior of competitive firms. Chapter 8 introduced you to the different types of costs that firms face. One big distinction is between fixed costs and marginal costs. From Chapter 9 you learn that a profit-maximizing firm should produce its output up to the point where marginal revenue (MR) equals marginal cost (MC). The blog entry linked above compares two different industry settings, each with high fixed costs but very different marginal costs: the auto industry and the movie making industry.

Do you agree with the author's characterization of the marginal costs in each industry? Why or why not?

Do you agree with the author's contention that competition will occur to the same extent in each industry?