Business economics - Seminar 2 (2015)Pràctica Inglés
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(a) Give two examples of coordination costs and two examples of motivation costs that you think may have arisen
in the system of economic organization described by GC Allen.
The master gun-maker outsourced many materials from the barrel-makers, lock-makers, sight-stampers, trigger-makers, ramrod-forgers, gun-furniture makers.
The motivation cost problem will be that if any of these industries would not produce as quantity as others, there will be a problem due to the fact that if manufacture cost and transaction cost are low, the production system will be wiped out. The problem is that if gun-maker does not earn money, other producers will disappear.
(b) Is this organization efficient? Why? For its time it could be, but for nowadays I do not think so. The problem is that there are so many outsource components, so the efficiency of the market is not clear, because if anyone cannot produce as much as others, there will be a problem.
The efficiency is in fact if this system had enough productivity then. So if the manufacture and all producers were in Birmingham and many costs were so low, as transport, specialized workforce,... There was efficient.
(c) Eventually, over time, all transactions described in this market were carried out within one or several large industrial companies. Why? Are there any drawbacks to mass production within a large industrial company? We do not know what the price of specialization then, but if these industries outsourced the most part of its needs we can suppose that this system of production was cheaper than produce all gun components into large industries.
Because we can observe that gun-maker bought so many things from barrel-makers, lock-makers, sightstampers, trigger-makers, ramrod-forgers,... For what? Well, it is a simple reason: the barrel-maker produced a lot of “x” product, and he was specialized on this so he produced cheaper than gun-maker. And this would be the same for all the rest.
So the problem was that to specialize all production system within fabrics was not efficient and for that they outsource so much.
Problem 2 (a) What arguments can justify these subsidies? Why is there an opposition against such aid? Use the concepts of market and political solution.
Basically two: first of all there is the cinema level of production here in Spain and there is also the problem of many people who work into this industry.
The oppositions could be that if Spanish cinema does not pay off, it would disappear, so many people critizises a lot the subsides because the production costs millions of euros and the subsides do not change the price of the entrance to view the film, so the subsides go directly to cost productions and not to the film consumer.
Eduardo 2015 We can solve this viewing the experiments of cheapen the price of the entrance from 6 to 3 euros. The result, the consumers were not 2 times more, as we can predict, there were 10 times more as usual.
(b) What effects arise in the short and long term when there are unexpected changes in the amount of subsidies? Consider which the factors of production (including workers) are in the film industry.
In short term the production of films will decrease and it would be a result of not having enough money, but for a long period this fact will result lethal to national film production, because of first workers will be hired, secondly producers will close and directors and actors will go to other countries to film their projects.
(c) Additionally, besides the film industry, do you know some other nascent industries that need long-term subsidies to survive? What justify subsidies in these cases? Renewable energy needs a lot of money to be profitable, due to nowadays this kind of industry is not so cheap and also it produces lower than other polluting energy as oil.
As common sense if we do not like live in a grey planet, surrounded by pollution, endangered species and cancer people, it is better to change our system of living although it is no cheap, but this would be more expensive than dying from lung cancer.
Problem 3 (a) Why building concrete walls in the sea separating different areas and assigning owners would not be an appropriate way to solve the "Tragedy of the Commons" that threatens the sustainability of fisheries? Because the sea is wild and building concrete walls will be very expensive and so stupid because of fishes could not eat as usual, seals will die due to their “travels around the world”.
Eduardo 2015 (b) Imagine that the sea could indeed be privatized into private plots, how would this affect the incentives for fishermen to use resources efficiently? What would be the equivalent of privatization in the case of the restaurant and the lobster? I have no idea, but it could result that fishermen will begin to do something to catch more fish, using fish farms or something like that. Finally the sea could be as country, full of farms where many people go to “grow” their product and not for hunting.
(c) In 2009, Elinor Ostrom won the Nobel Prize in Economics for her work on the solution of the Tragedy of the Commons. Search in the internet/books and explain briefly her theory.
First we have “Clearly defined boundaries”, after this it became the “Use and enjoyment of the rules on common resources are adapted to local conditions.”, “Use and enjoyment of the rules on common resources are adapted to local conditions.”, “Collective agreements that allow users to participate in decision-making.”, “Effective monitoring by monitors who are part of the community or to demand accountability.”, “Sliding scale for users who infringe the rules of communal prayers.”, “Mechanisms economic conflict resolution and easily accessible.”, “Community self recognized by the authorities of the higher authorities.” and “For large common resources of the organization at various levels; with small local communities in the baseline.” Wikipedia Problem 4 (a) What does the emergence of the Internet imply regarding the transaction costs of an economy (especially the coordination costs)? Are they today higher or lower than 20 years ago? Coordination cost decreases; due to be on contact is so cheap and easy. So today is cheaper contact from BCN to Vladivostok than 20 years ago, when we must to call or a common mail letter would arrive between 5 or 14 days.
So e-mail and all e-forces have changed our living.
(b) How might this change affect the optimal size of firms? Will firms be larger or smaller in the future? Definitely they will be larger than before. The capacity of communication, management and coordination between countries, continents and all boundaries is nothing today. We can observe that is so easy to order, manage, consume, solve problems,... than 20 years ago.
(c) What may this all mean for your future career? That will mean that it will come more uncertainty, due to the information will grow and many “excellent people” will be the best, so normal people or common business will have to adapt to this new kind of international business of international coordination.