Fundamental Question Review on : Law of Diminishing Marginal State

Case Studies Review done by My Assignment Help: Law of Diminishing Marginal State

Question 1:

The law of diminishing marginal returns states that if only one of the factors of production is increased, while the other factors are kept constant then the marginal product of each unit of input will decline as the amount of that input is increased, holding all other inputs constant (Samuelson, Nordhaus, 2000).

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Assignment Question:

Question 1:

Explain and illustrate with diagrams the differences between diminishing marginal returns and decreasing economies of scale and cite causes and examples.

Question 2

Suppose the jeans industry is an oligopoly in which each firm sells its own distinctive brand of jeans., and each firm believes its rivals will not follow its price increases but will follow its price cuts.

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Table of Contents
1. Introduction    1
2. Monopolistic Nature of the Market    1
3. Price Wars    2
4. Conclusion    4
6. References    5

1. Introduction
The oligopoly market is defined by the existence of a less number of sellers in the market, selling products which are close substitutes of each other. Where there exists intense price rivalry in the market. Analysts and researchers have spotted a similar pattern in the Australian food retail market. The Oligopolistic nature of the market is evident from the study.
The paper examines the existence of the Oligopolistic competition in the Australian food retail market and as well examines the impact of the recent price wars strategy followed by the food giants and its impact on the players in the economy.
2. Monopolistic Nature of the Market
The oligopoly market is defined as the presence of a few sellers in the market that sells products which are close substitutes of each other. One firm in the market determines the price and that price is assumed by the as the price charged by the industry since the products sold are close substitutes of each other  in the market (Research and Education Association, 2003 Pages 176-178). Oligopolistic market has a distinct product differentiation and often is found selling branded products where the distinction is creating through various advertising methods is very important.
An oligopoly has the features that have been discussed below.
The Australian economy experienced rapid development and growth which eventually led to the growth and expansion of the Australian food retail sector after the 1950’s. The Australian food retail sector has continued to grow and has emerged as the one of the main pillars of the Australian economy. The retail sector posted a profit of 69% in 2003-2004, which is an indicative of a high performance sector. The industry has developed with the emergence of a few players indicative of an oligopoly market.
The Australian retail sector developed with the rapid increase in the demand for food products and the availability of the products for consumption to the consumers. Rapid development of the Australian economy led to the emergence of Woolworth’s and Cole’s first by the 1960’s. During the demand for the discount stores also peaked in the period which lead to the emergence of retailers like Franklins ,Bi lo, Shoey’s as well as other half price stores but these stores were not as successful as Woolworth’s and Cole’s.(www.britzinoz.com accessed on 16/05/2012, Page 1)

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ECON30600 Microeconomics III Semester 2

Assessed Coursework



Please answer all parts of the coursework question. There are 33 possible marks and each mark will contribute 1% to the overall semester mark (a 33% contribution in total). Your answers should be typed / word processed in an acceptable format (e.g. Arial or Times, size 12, at least 1.5 spaced, every page numbered). Diagrams may be produced by hand. There is no word limit, however conciseness is desirable.

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