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by **Baseballer02** » Wed Dec 01, 2004 5:29 pm

Have to write a two-page essay for micro-economics, 10% of my grade. Not that hard of an essay but I've got a major headache. What I'm looking for is people's opinions on the following discussion questoins.

1)Suppose a firm invents a technology that reduces its costs so far that it can drvie all of its competitors out of business, even though the price that maximizes the firm's profits is well above its marginal costs. Would consumers be better off if this firm was forbidden from introducing its cost-saving technology?

2)Some music groups are in favor of allowing people to distribute their songs at no charge through P2P networks, while other are strongly opposed. Can you suggest why there are these differences?

3)Are the network effects present with the Internet fudamentally any different from those present with telephone systems or even from old-fashioned 3.5-inch disk drives and diskettes?

4)Some people argue that copyright protectoin and patent protectoins should be abolished, because the owners of patents and copyrights are effectively monopolists when it comes to supplying the goods for which they have these rights. What do you think would happen to the rate of innovation if patents and copyrights were abolished? What would be the likely impact on the well-being of consumers?

by **kentx12** » Wed Dec 01, 2004 5:32 pm

Do what??????? :-?

by **Baseballer02** » Wed Dec 01, 2004 5:34 pm

kentx12 wrote:Do what???????

Exactly.

by **BigMusky** » Wed Dec 01, 2004 5:57 pm

1)Suppose a firm invents a technology that reduces its costs so far that it can drvie all of its competitors out of business, even though the price that maximizes the firm's profits is well above its marginal costs. Would consumers be better off if this firm was forbidden from introducing its cost-saving technology?

-can not remember what marginal cost is, so I will skip it.

2)Some music groups are in favor of allowing people to distribute their songs at no charge through P2P networks, while other are strongly opposed. Can you suggest why there are these differences?

With the emergence of higher grade, cheaper MP3 Players(ipod,dell) I think fewer and fewer bands will vote to let people distribute songs over P2P networks (kazaa, napster) for free. The arguement before was that people still had to buy CD's to listen to them away from there computer, ie cars and outside. That has changed rapidly from when the first Napster arguement started because now MP3 players can plug into car stereos and boomboxes. The idea was that sharing music was increasing the band popularity and would eventually lead to sales or increase concert attendance. I think your teacher gave you a dated topic, so I would argue that some musicians are not in it for the money or that concert revenue out weights royalties received on the CD's. Maybe bands dont care that much about record royalties because most the money goes to the record label.

3)Are the network effects present with the Internet fudamentally any different from those present with telephone systems or even from old-fashioned 3.5-inch disk drives and diskettes?

what I think he is getting at is:

online shopping is comparable to catalog shopping
email is comparable to phone calls
chat rooms comparable to conference calls
downloads similiar to info passed on disks through mail. Speed and convienence is the obvious difference, but not a real fundamental difference. Ebay would be something that can not be linked to a phone system.

4)Some people argue that copyright protectoin and patent protectoins should be abolished, because the owners of patents and copyrights are effectively monopolists when it comes to supplying the goods for which they have these rights. What do you think would happen to the rate of innovation if patents and copyrights were abolished? What would be the likely impact on the well-being of consumers

There would be no motivation for companies to invest in future developments and would halt most major improvements seen in companies today. Large companies that are very profitable infest alot of money in new technologies so they become more profitable. Rich become richer, ridding of patents would break this cycle.

by **acsguitar** » Wed Dec 01, 2004 6:09 pm

Micro Economics are smaller then regular economics thats all I know

by **wrveres** » Wed Dec 01, 2004 6:19 pm

Just my .02
Hope it helps
Not sure I understand number 3 properly

Baseballer02 wrote:
1) Suppose a firm invents a technology that reduces its costs so far that it can drive all of its competitors out of business, even though the price that maximizes the firm's profits is well above its marginal costs. Would consumers be better off if this firm was forbidden from introducing its cost-saving technology?

American capitalism at its best ...
It would set a bad precedent if corporations "didn't" look for ways to reduce costs. Just because it forces its competition out of the market, does not mean that it cannot be applied to other business models. The invention of the automobile forced a ton of horse drawn buggy companies out of business. Honda and Toyota introduced cost saving technology to the Automobile market in the 70's and damn near put the big three out of business, but the Big 3 learned, and adapted from it. Again, it would set a bad precedent it corporations did not constantly look at ways to "reduce costs" ..

Baseballer02 wrote:2) Some music groups are in favor of allowing people to distribute their songs at no charge through P2P networks, while other are strongly opposed. Can you suggest why there are these differences?

It is simply exposure.. The more a band is heard, the more popular they will become.

Baseballer02 wrote:4) Some people argue that copyright protection and patent protections should be abolished, because the owners of patents and copyrights are effectively monopolists when it comes to supplying the goods for which they have these rights. What do you think would happen to the rate of innovation if patents and copyrights were abolished? What would be the likely impact on the well-being of consumers?

The rate of innovation would come to a screeching halt..
Billy Bob could invent the newest "paperclip", but not have the resources to take it to market, and some shrewd business owner could easily steal his idea and make millions. Patents and copyrights are designed as protection, and rightfully so.

by **Baseballer02** » Wed Dec 01, 2004 6:28 pm

Thanks Musky and wrveres, now I just gotta figure out how to stretch the comments from yas to two pages. :-D

I've yet to fully understand what #3 is asking, and noone else seems to know as well. Musky's input on #3 was okay, but not quite sure what floppy disks would have to do with email and chatrooms, etc.