Micro Econ AP 2nd Semester 2019

In class, we learned about the many different types of markets ranging from free competition to monopolies to other markets in between. One type of market that was mentioned but never really talked about was a duopoly - a monopoly shared between two groups/companies. Although they are less common, they do exist such as MasterCard and Visa, PepsiCo and Coca-Cola, etc. However, one market that tends to get overlooked is that of large planes. This market is dominated by two companies - the North American Boeing and the European Airbus - who control approximately 99%. One major reason that this fact is not as well known is because it simply does not affect us and is hidden in the background. For example, when booking a flight the model of the plane is usually not a major thought that comes to mind; other factors such as ticket costs, seat availability, etc. usually take precedence. Yet, the two crashes of the Boeing 737 Max airplanes are starting to highlight the importance of understa

Unlike the examples of monopolies we have studied so far, natural monopolies do not rely on threats, collusion, or hostile takeovers. Instead, a natural monopoly occurs in an industry where one firm can supply goods or services to a market at a lower cost than could two or more firms. This is due to very high start-up costs of creating a competing business in a specific industry. It is rare to see one, but they do exist, as a single player in an industry. Since it is economically sensible to have a natural monopoly in an industry that supports one, the government allows them to exist, while placing regulations to ensure that consumers do not get cheated. The most common examples of natural monopolies are utilities such as railroads, pipelines, water supply systems, etc., since these industries are characterized by high costs of production. Having additional firms would be inefficient, as each would have to go through the high costs of duplicating the facilities to compete.

March Madness is in full swing. With many upsets and underdogs rising to the occasion, you never know what can happen. The NCAA March Madness Division I Men's Basketball Tournament is a single-elimination tournament including 68 of the best college basketball programs in the U.S. How exactly does the tournament fair in the economy? The NCAA made over $1 Billion in revenue off the tournament from ticket sales, right fees, corporate sponsorships, and T.V. ads. This makes them the most profitable firm who makes the most off of March Madness. Not only does March Madness help the NCAA make a profit, but it also has a great impact on firms around the entire U.S. Host cities are able to generate tons of profits due to a large number of visitors visiting to watch the games. Unlike other championship games, the tournament games are played all over the U.S. With 14 different host cities for the bracket, it allows businesses to generate much more profit with traveling fans coming in. F

In short, game theory is the study of strategic interaction. This means that how well you do depends on the actions of others as well as your own choices. Games are a common showcase of strategic interaction; games like chess or Connect 4 are played between two different players, and the actions of one player are dependent on the other's. The concept of rationality is essential to understanding game theory. Rationality refers to players understanding the setup of a game, and being able to reason out the right moves to play. Game theory only works with rationality; in order to make my decision, I would have to assume that my opponent is rational and knows what they're doing. At the same time, I would have to also know that my opponent knows what I'm doing. And vice versa. Thaler's guessing game is a good example of rationality, in which contestants must pick a number between 0 and 100. The winner is the one with the number closest to two-thirds of the average of all

       At the moment, minimum wage is higher than it's ever been before. Even then, many politicians, generally democrats, are lobbying for federal minimum wage to be increased further to $15. The "Fight for 15" is extremely divisive dependent on geographical location. This is due to the myriad of factors that impacts the success of having such a high or low minimum wage. In Seattle, they increased the minimum wage from $9.47 to $11 in 2015. Researchers found that this caused insignificant effects on employment. However, when they further increased the minimum wage from $11 to $13 in 2016, it ended up hurting employment. In such a specific location like Seattle, it is unclear what the ideal minimum wage is. From there, how can we have a federal minimum wage that applies to all states. For example, In Alabama, the median hourly wage is only $15.77. Having a federal minimum wage of 1$5 would make it the 95th percentile of its current level. This would turn the job market on

With everything becoming accessible online, it’s no surprise that drugs are now easily sold and bought online. The dark web has rose in popularity over the last decade as it has become easier and easier for people to remain anonymous. The online drug market started off with The Silk Road, which was the first and and longest standing dark web platform. Once that was finally shut down, dozens more were created to take its place. While these platforms are all relatively short-lived, the turnover rate between platforms is so quick it’s as if nothing was ever shut down. When using an interface that’s known for secrecy and anonymity, the issues of trust and moral hazard come up. How do you know that you’re not getting ripped off if you can’t rely on face to face interaction and seeing the product before buying it? According to the LSE that doesn’t seem to be that big of a problem. Only a small minority of drugs being sold receive bad reviews, which means the issue of ripping

I'm sure most everyone has gone skiing or seen snow at least once in their lives. Lift tickets these days however seem to be getting out of control. A one day lift pass is around $150 in California. This means that if a family of four decides they want to take a family vacation to Tahoe, they have to pay around $600 for one day. That is excluding all the gear and other skiing paraphernalia required to shred down the mountain. Which brings me to the next point: lift prices not only affect the amount of people that can come to the mountain but also the smaller businesses around skiing.  To be able to ski, you need the proper clothes, skis, poles, boots, ect. All of this must be supplied by retailers and other businesses. Most of these businesses in recent time have disappeared because of the lack of demand. Less and less people are skiing as prices rise. Now, these businesses may be shutting down similarly to Sports Authority, due to the popularity in online shopping. However mos

Recently, AI (artificial intelligence) has been the topic of many conversations around the world. Different forms of it are also present in our everyday lives. Amazon and Google use AI to try to figure out what you might want to buy next, or which website you want to find. Siri is a form of AI that Apple uses to assist their customers.  AI is now being introduced in the workplace and there is heavy debate whether or not this is a good idea. It is predicted that almost 40% of jobs will be replaced with AI in the next 15 years. These jobs include both white and blue collar professions. The industry that will be affected the most are drivers. Currently there is a lot of fear mongering in the public about this potential great loss.  A similar event happened in human history with the industrial revolution. With the invention of steam powered machines, people thought most of the worlds jobs were going to be taken over by machine. What happened was the basic level jobs were

We have all heard of those crazy Big Pharma conspiracy theory, that the large scaled pharmaceutical business operates for sinister purposes and against the public good. Although I don’t know for sure if Big Pharma is evil, they definitely are a form of an oligopoly.   Big Pharma is a nickname given for the pharmaceutical industry in the United States that makes billions of dollars every day and is responsible for the development, manufacturing, and marketing of drugs for use as medications. The reason this is such an oligopoly is because of the high prices driven up by the 6 major companies able to push their drugs onto the market. Just like we learned in class, because of the large amounts of money these companies make, the marketing that is done is what really sets these companies apart from each other. Advertising is key for these drug companies, they even spend 19 times more on marketing than they do on research and development. In 2014, spending on advertis

An oligopoly is a market in which there are only a few sellers. There are both advantages and disadvantages to this kind of market which I think is important to consider because there are many oligopoly markets that we interact with every day. The first benefit of an oligopoly is that there are only a few sellers which enable consumers to compare their choices easily. In this way, consumers aren't besieged by large amounts of products from a variety of different companies. Rather, an oligopoly offers limited choices which make it easy for the consumer to pick and choose which service and/or product they want. Another benefit is producers are able to generate high profits. Since there are only a few producers and there is no easy entry into an oligopoly market, companies that are a part are able to make a large amount of money since they control a large share of the market. In other words, each firm is a "price maker" and if companies work together, they can generate l

Two subjects that will forever be related whether in books, concept, or even college majors (PPE, PE, etc.)  But what do they have in common or, more specifically, how does philosophy have economic qualities? Currently we are studying Game Theory, but this can be narrowed down in many cases to rational choice, so let's focus on that.  I'm sure many of you can immediately connect this to what philosophers have studied for ages, but lets dive into it anyway. Rational choice is comprised primarily of rationality (duh), preference, risk, and uncertainty.  Preference is key because without it there is no goal for which rationality can guide us to.  So first we must locate our preference which can be highly subjective and has been debated in philosophy centuries.  One of the first that addressed varying preferences was pre-Socratic philosopher Protagoras, a famous sophist.  Sophists were disliked because they would teach anyone the art of argument, even if that person was a cr

Printing was first developed, according to some, in China around the year 500. Paper also came from China, and made it way to Europe, but printing wasn't created or brought there until the 1400s. Since then, numerous published have opened shop, where today they get requests from authors, and are then able to decide to print a book and get a percentage of the profits (depending on the agreement with the author), or have them move on to the next publisher. Harry Potter, one of the most successful series of books in the last couple of decades, was initially rejected by 12 publishers who didn't think it had a good chance. Bloomsbury, an independent British publishers, finally agreed to publish the book and subsequent series, (and later Scholastic in the United States). This idea of each publisher being able to accept or reject author's proposals, and (if accepted) the ability to offer different amounts of money, different payment schemes, creates great competition between

From action figures to cereal boxes, people spend a lot of money on things that remind them of their childhood. The fact that a lot of these items are extremely rare doesn’t hurt their retail value, as it adds to their “dreamy”, “unobtainable” vision. Disney makes a lot of money counting on the nostalgia people have for certain franchises. The second Incredibles movie had a lot of people bringing their kids or younger relatives to the theaters to watch it since they watched the first movie when they were kids. People will willingly watch the same premise executed slightly differently over and over again if it means that they get a nostalgia factor out of it. Many people thought that the E.T. game was the leading cause for Atari's demise. It was widely hated by most people that played it, but now copies of the game are being sold for over a thousand dollars. The power of nostalgia and rarity in an item is illogical, but it pushes many people to buy very expensive things tha

In class, we started to learn about oligopolies and the different tactics within this type of market.  An oligopoly is a form of market where it is dominated by several large companies. Oligopolies are similar to monopolistic competition, but instead have products that are similar to one another.  Oligopolies are seen throughout our daily lives, with things like cell phone carriers, auto manufactures, etc. The airline industry is also an example of an oligopoly. As of 2017, “ there are four major domestic airlines – American Airlines, Inc. (AAL), Delta Air Lines, Inc. (DAL) Southwest and United Airlines.”  While there are many smaller airlines, these 4 have dominated the market.  With this competitive industry, the airlines must find ways to differentiate themselves from their competition.  This is mostly seen in the form of advertising and additional benefits. Many airlines utilize advertising to attract customers.  Delta has Sky360 Lounges, sleek and fancy set ups , packed

Internet service providers appear to be an oligopoly at face value, but if you look closer at the ISP market, it starts to look more and more like a true monopoly. Companies like Comcast, AT&T, Sprint, and Verizon market themselves as competitors to one another, creating heavy advertisement campaigns to show consumers how they are different and better than each other, but the truth is that they are not really competitors for many consumers. In reality, many Americans find ISPs to be close to a monopoly due to geographic locations. The problem with ISPs is that most Americans cannot get access to all the options. Unlike in an oligopoly where consumers can still choose between several options, in the ISP market, there are many locations in the country where people only have one or two ISP options to pick from. This creates a geographical monopoly, as consumers cannot simply move somewhere else to pick from a different selection of ISPs. In 2017, only 31% of ZIP codes had access to

In the documentary “Downloaded” we learned about Shawn Fanning and Sean Parker’s company, Napster. 12 years on in 2012, Shawn and Sean teamed up once again with the release of their new startup, “Airtime”. It began as a website similar to Chatroulette, where users could interact with people online. In the end, it failed to get many users, and was shut down the following year. Parker believed the app was too technically ambitious for its time. After some reworking, “Airtime” was released as a mobile phone app in 2016. Upon hearing this I wanted to try it out. A Glorified Facetime The basis of Airtime is that you can video chat with your friends while running background media such as Movies, Music, Youtube. The only problem was when I would used the app, it felt more like a grainy video call with a buffering video. It has added features like a chat mode and emoji reactions and sounds which can be a lot of fun. Network Airtime Is best feature is how you can use to interact wit

From 1996 to 2019, the average price of insulin has increased from $21 per vial to $295 per vial. That is over a 1304% increase in the price of one of the most commonly needed prescription drugs in the United States. Insulin is used to treat diabetes, and over 100 million people in this country are either diabetic or prediabetic. That’s a 100 million people that need insulin to live, and only a small percentage of those people can afford the costs. The NovoRapid insulin pens that cost $140 here in the US cost only $8 in Taiwan and $13 in Canada. So why are the prices of insulin so steep in the US? In his show The Patriot Act: Drug Pricing , Hasan Minhaj places part of the blame of the extreme insulin costs on the big insulin manufacturers, Eli Lilly and Company, Novo Nordisk, and Sanofi Aventis. Since their patent on insulin has an expiration date, in order to avoid competition in the market, these companies slightly alter their drug and file another patent. In other words, these c

     I love bananas. They are by far my favorite fruit, but who would have known that they have such a deeply rooted, and troubled history? Today bananas are the world's fourth most consumed food. Yet before the 20th century, bananas were a rare, even unknown commodity but since the rise of companies, namely United Fruit and their "banana republics", bananas have taken the world by storm. Yet, what is a banana republic, and no I do not mean the high-end clothing stores.      A banana republic as defined by Webster's Dictionary is "any small, usually Latin American, country that is politically unstable and has a one-crop economy controlled by foreign capital". In 1899, the United Fruit Company was formed by a merger and in 1984 it would become renamed the Chiquita Brands we know today. Companies like United Fruit bought huge swathes of lands in Central America and northern South America to grow bananas in climates that were perfectly suited for their growth

 Monopolies are all around us in the world, and not all of them are  obvious on the surface level like Google and Facebook. For example, you might be searching for hotel rooms and browse multiple "competing" sites like Travelocity, Trivago, or Hotel.com. What you most likely do not know however, is that all three websites are actually all owned by the same company; Expedia group. This illusion of free choice is used to hide the fact that Expedia essentially hold a monopoly over the industry and all hotel bookings actually go through them. These fake competitors which are all owned by Expedia Group controls 75% of the US online travel agency industry, Similarly, apple fans and Microsoft fans stubbornly stick to their respective brands of computers; not knowing that the laptops all come from the same Chinese manufacturer. Throughout all types of industries such as the ones listed earlier and others such as smartphones, supermarkets, beer, and even sunglasses, hidden parent co

In class, we learned about Google's monetization model. Specifically, we examined how it profits off of selling data about its users including their search history and links they clicked on to advertisers. The advertisers then targeted these users with user-specific ads to significantly increase the chance of users clicking these ads and purchasing these products. Many people consider this practice of selling user data to be quite unethical, as it means that personal information of users is used to profit from private companies, a practice that is not always clear to less technologically-educated users. However, user data is valued very highly as important consumer trends can be deduced from the data, so big corporations are unlikely to stop selling user data anytime soon. One such example is with Facebook. The company has found itself in hot water with the public time and time again as it keeps getting caught up in data scandals. Facebook sells user data to third-party organizat