T Nation

Economics HW

Does the U.S. Economy have the chracteristics of the perfectly competitive model in some respects? Describe types of business organizations that do NOT fit the characteristics. Help a brother out someone =)

There are many industries that lack competition. Most with only one option in many locations. Phone, Cable, Trash pickup, electricity, water, sewage. It seems to be a fairly straight forward topic, but you should do your own homework.

Translation: Hey guys, I’ve got a final paper to write in the next few days that I’ve put off and I need some ideas. Help a brother out (oh and by the way, I added the word “brother” so you’ll feel some sense of loyalty to this Testosterone Nation and will help me write this paper).

But since you did add that word “brother” in combination with a crappy ass smiley face (the synergistic properties got to me), here are some ideas:

In America, we are faced with more choices than we can actually ever decide between. We not only have our choice in what to wear, eat, shop, etc, but in today’s world we can choose how the news is delivered to us, methods of communication (phone, cell phone, e-mail, letters), and a host of other opportunities that no other society in history has had. Furthermore, the internet has opened a whole host of opportunities, from listening to radio from a hemisphere away to buying products directly from the manufacturer. All leads to a perfectly competitive model…and so on and so on.

Non-competitive models:
The most common is the government authorized monopolies. You don’t have a choice in your electric company, many don’t have a choice in phone companies (especially rural America), and so on and so forth. One could also argue that there are state proprietary functions which are non-competitive. You don’t have a choice between which local bus company to use, which set of state parks to use, or (in states such as Virginia) which liquor store to use. In that sense, you’re just stuck. While you could simply “vote with your” feet, this is hardly a perfect competitive model.

Okay, take it from there.

you want us to do your homework for you?

In some respects, yes. In some respects, no. For example, take the steel industry with the tarrifs the U.S. gov’t puts on imported steel to help our poor, beleaguered companies that can’t compete with more efficient overseas plants. That stifles competition and provides a disincentive for the steel companies to invest in efficiency. However, the original blame may lie with the unions that demanded wages that made it impossible to invest in new methods, especially when you can’t trim your workforce anyway. There are many good arguments for the need for unions in certain circumstances but it is certainly a hinderance to the perfect competitive economy. In a perfectly competitive economy, one has the ability to create their own competitive edge…they don’t need it created for them by the government.

Well, you can probably start with every massive corporation in the US and start to fiddle around from there.


As a “semi-economics” major (Global Studies), I can give you a brief outline easily.

The US does NOT have most characteristics of the perfectly competitive model. Many of the numerous small businesses, restaruants for example, are monopolistically competitive as each business sells a slightly different product (Basically, think same industry but the product from each corporation differs with some aspects from each other).

An example of businesses not fitting the perfectly competitive model are Pepsi and Coca-Cola, which are in fact oligopolies (a few businesses dominating most of the market). Same with the U.S. media industry, as only ten companies (more or less) control all of America’s information and entertainment. Companies like Viacom own MTV, UPN, Nickalodeon, TNN, BET, Howard Stern, Free Press, and a host of other television/radio stations and publishers. (Or Canada’s newspaper industry, which roughly 70% is owned by one man, Conrad Black, just to give you an example of mocking my own nation).

The only perfectly competitive industry in ANY world would be involve wheat sales to an extent (if you limit it to the Western world), or the Chinese food stand market in China, as all of that crap will kill you just the same :slight_smile:

I should have said more, but this is free blabbing man.

That sounds like a trick question. The key word there is “perfectly” – the answer, for any industry that has not just been invented in someone’s garage, is no.

It’s not a paper just a question can be answered in a few sentances. I’m just stuck cause i lost my eco book and dont feel like spending 75 for a new one. Plus the reason i was in a rush is because i has no time, i was liftng weights. =)

Man, maybe I should be putting my exam questions up and make you people study for me.

I only have one question nailed for sure: “Did you learn anything useful in this course? If you did, convince me to give you 100%”

The US has some kind of labour market model where there isn’t much welfare or unemployment insurance to make people desperate to get a job. In theory this might work, but according to an article in the Jan 99 American Journal of Sociology, the US government has made significant interventions into the US labour market by way of the penal system. They look at the US penal system as a labour market institution & they found that in the short term having so many people in prisons (~1500000 in 1999, 2100000 now) has a signoficant effect on the US unemployment rate. If you include the amount of employable people in US prisons their unemployment rate is about the same as the Canada/Europe average. In the long-term it basically takes people’s skills away. They go to prison & come out with no skills to get a decent job, get desperate, commit crimes & get sent back in. It’s an interesting read & you can probably find it in your local university/college library or sociology department since it’s such a mainstream journal.

Guys, i really appreciate the help. At first i had a little trouble understanding and had some writers block in addition to a limited amount of time to answer the Q. Thanks again, for all of you who helped if i can ever do a favor, it’s no problem. But btw, it was just a graded HW, counts for like 1 point of my final grade, no big deal, but thanks again.

I forgot to give the title. It’s “How Unregulated is the US labor market? The US penal system as a labor-market institution” by Bruce Western of Princeton & someone else whose name I can’t remember offhand. Amer J of Soc, Jan 1999.

Hey what do you know Monsieur Marx chimed in with some of the usual idiotic blather. It must really piss him off that most ditch diggers in the US make more every year than he will ever make. Of course, I suppose anyone employed anywhere makes more than Monsieur Marx.

Let’s take a look into MM’s thought process: “Trying REALLY REALLY hard to find some loophole to compare, wherever he has to get it from as long as it makes the US look bad… Aaahh, the January 99 issue of the American Journal of Sociology, (how long was THAT internet search?) Let me see – USA, unemployment… hmm… OK none of the data in the regular publications is working… No, no, it looks like it really is a very successful economy… ok I’m on Google page 2567… THERE! THE HOLY GRAIL! Now I can conclusively show how the American economy is in SOME way analagous to the welfare states. It has nothing to do with the question asked, but what the Hell?”

How about this? We could take the quebecois route and just have a nasty, estrogen-filled temper tantrum (hey it’s OK for french"men" to cry!) at the first sign of any trouble. Then we could use our frustrations to mistreat anyone that sounds or speaks differently than us, threaten to secede when we don’t get our way, and just generally act french while the real Canadians take care of business. Then we can complain about the 50+ nation unilateralism of the US as our sunburned-armpit froggy father country continues to set new heights for the concept. We can have out-of-control riots for strange reasons, because, in the grand french tradition, we don’t work more than 15 hours a week (and demand free everything), and we don’t have anything better to do. We can go out of our way to be extraordinarily nasty, like a province of 14 year old girls, so as to discourage tourism to a lovely land and to try to drive out the besieged, wonderful, industrious, and quite pleasant CanadiAns that live here. We can emasculate the proud Canadian military, and we somehow trust those evil greedy Americans not only to not invade, but to protect the interests of Western civilization while we try our pseudo-french best to stab them in the back. Let’s not forget to sneer at the capitalist English-speaking Canadians, but not too loudly, because of course those are the Canadians that everyone likes, and we depend on their industry and genius to pay our medical bills.

The USA as quebec! Sounds great, eh? Although I might have to warn you that the Texans are not going to take this very well.

Well, we can’t send everyone to the gulag, can we, comrade?

Just busting your chops monsiour. Your article brings up an interesting hijack, but I thought I would mention a couple points.

The unemployment rate is defined by the number of unemployed workers divided by the labor force. The key point is that the labor force does not include people who are not looking for a job. Plenty of people besides criminals are not included in the unemployment rate; both the elderly and minors are excluded too, as well as the disabled and any “stay at home” wives or husbands. In fact, if you look at the percent of people working compared to the total population, it is vastly different than the unemployment rate.

Further, the article sounds like it is assuming that if the criminals were not in prison they would be unemployed. While I have no doubt that unemployment is significantly correlated to crime (someone want to run a regression?), I think it would be wrong to say that all criminals were unemployed or would be unemployed in the future. I have no idea of the rate of repeat offenders or much insight on job and skill training done at prisons, but the article sounds like it may be playing with some funny numbers in its “unemployment rate” comparisons.

Anyway, sounds like an interesting article, but I’d be careful anytime a sociolist starts using numbers.

As to the original question, fat panda hit the nail on the head. A lot of US corporations are oligopolies. If this was for something more than a quick homework question, I’d recommend you study up on Michael Porter and his five forces.

Also besides the government regulated industries mentioned above, I’d just like to add that monopolies in of themselves are not illegal. Patents for example, give drug companies monopolies and exclude competition. Airlines may also own hubs at airports giving them significant control of the flights to that airport. Microsoft is also a monopoly. Just to give a few examples.

Damn, I’m kind of embarrassed to have posted after that guy. I mean I was just poking fun, with my comrade bit, this guy means it.


MQ –

Interesting as it is to look at the effect of imprisoning people on the labor market, I rather think the more important function of prisons is keeping criminals away from the rest of society. While I don’t agree with a lot of the drug laws, keeping violent criminals locked up is a good thing. And thank you for pointing out that doing so apparently has the bonus effect of lower unemployment (which, of course, drives up wages for the same law-abiding, working class people who would be competing with the incarcerated for jobs).

Waitaminute, I found it online:

“Incarceration, unlike social welfare policy, deepens inequality because its effects are increasingly detrimental for young black & unskilled men, whose incarceration rates are highest & whose market power is weak. This argument suggests that incarceration has lowered the US unemployment rate, but it also implies that sustained low unemployment in the future will depend on continuing expansion of the penal system”