Role of politics in the economy.

Graphing Question 1

A. Draw a Kinked Demand Curve Graph for ATT and Verizon. Show Prices and Costs on the vertical axis and Quantity on the horizontal axis. There will be 4 curves when you are finished: D(K) Demand (Kink), MR (K) Marginal Revenue (K), MC (A) Marginal Cost (ATT) and MC (V) Marginal Cost (Verizon). We will assume that ATT is the efficient firm and Verizon is the inefficient firm. (This is not based on fact, just because the graph must show 1 efficient firm, and 1 inefficient firm, both taking profits in this graph picture.)

Make sure each curve takes the proper shape and passes through the point indicated below:

1. Demand (Kink) - Demand curve with slight slope above the kink and a steep slope below the kink. It touches each axis. (The kink is at a Price of $75 and a Quantity of 250,000. This implies the average person in Hampton Roads pays $75 for cell service monthly and the business has 250,000 accounts in Hampton Roads.
2. Marginal Revenue (Notch) - Revenue curve with the same shape as Demand above, but each part of the curve is twice as steep as that one. There is a notch created by two points at the top of the notch and the bottom of the notch. The point at the top is at a "Marginal Revenue" of $60 and a Quantity of $250,000. The point at the bottom is at a "Marginal Revenue" of $45 and a Quantity of $250,000. Draw a perfectly vertical line segment from the top point to the bottom point. This is the notch.

3) Marginal Cost (ATT) - Marginal Cost Curve (Nike Swoosh Shape) with a point at a "Cost" of $45 and Quantity of 250,000.

4) Marginal Cost (Verizon) - Marginal Cost Curve (Nike Swoosh Shape) with a point at a "Cost" of $60 and a Quantity of 250,000.

B. Draw Economic Profit for Verizon with this rectangle: Top Left at 0 on the Price and Cost axis, top right at the Kink Price of $75, bottom left 0 on the price and cost axis, and bottom right at cost of $60.

C. Draw Economic Profit for ATT with this rectangle: Top Left at 0 on the price and cost axis, top right at the Kink Price of $75, bottom left at 0 on the price and cost axis, and bottom right at a cost of $45.

Answer this question by writing the answer I have provided below, at the bottom of your graph: "What is the point of the kinked demand curve?"

"In a 2-firm oligopoly, each firm ignores the competitor's price increases, but matches the price decreases. This causes them to both charge the same kinked price. Because of the notch this creates in the marginal revenue curve, both an efficient firm and an inefficient firm can make economic profits. The inefficient firm (Verizon in this example) can stay in business even with higher cost than its competitor because its customers are charged the inflated kinked price.

Graphing Question 2

Look at this graph. It was in the Power Point Presentation and I said it depicted what might happen if Amazon is pricing how much it charges its third party sellers to appear on the platform and sell there. Can you explain it? In your own words explain the best you can.

Discussion post #1 250 words***note to writer reference is video no need to do up a reference sheet or quote during write up,. Its own words writing after watching video

Watch this vlog called: "Sears Survival?" https://www.youtube.com/watch?v=AVI3a9uY6dY&t=7s
The economy has changed since the company filed for bankruptcy, early last year. (2019). Competitors like Neiman Marcus and JC Penney have now filed for bankruptcy too. Sears left Virginia completely by closing the last 2 stores in Chesapeake and York County. Consider these points as you watch the vlog and participate in the discussion:

1) What has happened to Sears with regard to costs?

2) If you sketched out a production function for Amazon, Wal-mart, and Sears, how would they compare?

3) Suppose you are 150 years old, and you have been able to see all of the competition Sears has faced over the decades. (Sears has been around for only 130 years, but you needed the extra 20 years to grow up.) How should Sears have managed costs, and what should it have done about changes in consumer tastes?

Discussion post #2 ***note to writer reference is video no need to do up a reference sheet or quote during write up,. Its own words writing after watching video

Watch the vlog. https://www.youtube.com/watch?v=IvZSSpHFvF4&t=64s

Respond to the following prompts in a post with a minimum of 250 words.

• How has Google disrupted the economy recently?
• Why was Facebook included in the vlog?
• Discuss the role of politics in the economy. You may either discuss some of the historical events presented in the vlog that disrupted the economy, or you may discuss the 2016 and 2020 elections…or both.