Economics Term Paper essays

Economics Term Paper essays Just as Governor Bradford discovered during the famine at the time of the original Thanksgiving, we must allow for an unrestricted government and let the invisible hand go to work. When there is a competitive market after an event such as Hurricane Charley, it allows for equilibrium to still take place. Doing this allows the average total cost to stay as close to the norm as possible. This would be true because otherwise it would be at the expense of the seller to purchase more supplies than normal and would in turn cost him more than he would typically pay for each product. A competitive market would allow this seller, in his presence of high demand, to keep his constant returns to scale as close to how it was previous to the hurricane. Otherwise the seller would experience a diseconomy of scale as equilibrium would not be ideal. One of the three basic insights to market outcomes states that free markets produce the quantity of the goods that maximize the sum of the consumer and producer surplus. Having a laissez-faire market during a time like this would most likely uphold this insight. Allowing a free-market can also have its problems. Sellers would have the free right to sell products during a crisis at whatever price they feel. This could cause a monopolistic effect and those buyers with the inability to pay would be left with nothing. The owner and his new monopolistic business would be producing and selling an amount of goods below what would maximize surplus. As soon as the store owner raises his price above the marginal cost, less people will want to buy them. In order for the store owner to maximize profits, he would have to find out at what cost the marginal revenue equals marginal cost. As displayed by the graph, less output and higher prices emerge from a monopoly. The graph shows that the price is higher and the output lower than the competitive market ...