Unit 7 how firms compete

1. Read and memorize the following words, word- combinations and word-groups:

to influence the market - мати вплив на ринок

e.g. No individual or group can influence the behavior of the market.

interchangeable - взаємозамінний

e.g. The individual securities of a particular firm are totally interchangeable.

at will - за власним бажанням

e.g. Traders can buy or sell individual securities at will.

collusion - домовленість; зговір

e.g. Collusion is a secret arrangement between two or more firms to fix prices or share the market.

utilities – підприємства громадського користування; комунальні послуги

e.g. Public utilities are privately owned firms that provide an essential public service.

merger – об'єднання (підприємств)

integration - інтеграція, об'єднання

e.g. The combination of two or more book publishing firms would be an example of a horizontal merger or horizontal integration.

trademark – торгова марка

e.g. Trademarks are special designs, names or symbols that identify a product, service or company.

2. Give English equivalents to the following:

комунальні послуги, ринок, торгова марка, об'єднання (підприємств), надавати перевагу, угода

конкуренція, за власним бажанням, взаємозамінний патент, монополія, мати вплив на ринок, продавець, покупець

3. Fill in the blanks with appropriate words:

1. Economists often speak of the «structure» of a …

2…. are able to enter or to leave the market at will.

3. A market in which there is only one seller is a …

4…. motivates producers to improve the quality and increase the variety of goods and services.

5. «Соkе» is a... of the Coca -cola Company.

6. In a monopoly supply is determined by a single …

7. Under conditions of perfect competition... could be found at the intersection of the supply and demand curves.

8. The products of certain industries such as aluminium, chemicals and electro­nics, are protected by....

Words: market price, buyers and sellers, monopoly, trademark, patents, market, competition, firm.

4. Read and translate the text:

Markets exist wherever people come together to buy and sell their goods and services. In economic systems during such hours, consumers and producers exchange their goods and services in many competitive markets.

A perfectly competitive market, according to economists, requires all of the following conditions:

- Many buyers and sellers; no individual or group can influence the behavior of the market.

- Identical goods or services offered for sale.

- No buyer or seller knows more than any other about the market.

Buyers and sellers are able to enter or leave the market at will. Few markets have all these characteristics. The New York Stock Exchange, the American Stock Exchange and other similar securities markets, however, are good examples of perfect competition. The individual securities of a particular firm are totally interchangeable.

Collusion is a secret arrangement between two or more firms to fix prices or share the market. These agreements are usually illegal.

Public Utilities are privately owned firms that provide an essential public service. They are granted a monopoly because it is felt that competition would be harmful to the public interest.

Trademarks are special designs, names or symbols that identify a product, service or company. Many businesses are naturally interested in growing and controlling as much of a market – or several markets – as possible. One way to accomplish this goal is through a merger.

Mergers fall into three categories: horizontal, vertical, or conglomerate.

The combination (or «integrating») of two or more companies engaged in the same business is a horizontal merger. The combination of two or more book publishing firms would be an example of a horizontal merger or horizontal integration.

A conglomerate merger combines two or more unrelated businesses under a single management.

5. Answer the following questions:

1. When do markets exist?

2. What does a perfectly competitive market require?

3. What are Public Utilities?

4. Why are they granted a monopoly?

5. What is a trademark?

6. In what way does the competition among producers benefit us all?

7. How can many businesses grow and control as much of a market as possible?

8. How many categories do mergers fall into? Name them.

6. Define the terms:

Interchangeable, to influence the market, single management, behaviour of a market, to fix prices, conglomerate merger, competitive market.

7. Translate into English:

1. Ринок існує скрізь, де люди збираються разом, щоб купити або продати свої товари та послуги. 2. Покупці та продавці можуть виходити на ринок або залишати його за власним бажанням. 3. Приватні цінні папери певної фірми цілком взаємозамінні. 4. Зговір – це секретна домовленість між двома або більше фірмами про встановлення цін і розподіл ринку. 5. Конкуренція в сфері підприємств громадського користування вважається шкідливою для громадського інтересу. 6. Одна з умов найбільш конкурентоспроможного ринку це те, що жодна приватна особа або група не можуть мати вплив на ринок, 7. Конгломерат об'єднує дві або більше незалежних фірм під єдине керівництво.

8. Read and dramatize the following dialogue:

L.: What of the world's well-known economists do you know?

A.: Well, Joan Robinson (1903–1983) taught economists at England's Cambridge University for more than 40 years. Her book «The Economics of Imperfect Competition» (1933), led her to be recognized as one of the world's foremost economists.

L.: Taking their cue from Alfred Marshall, economists of the 1930's based their theories on the concepts of perfect competition and monopoly.

A.: Did perfect competition often occur?

L.: No it didn't. Perfect competition, with its many buyers and sellers, all of whom had perfect knowledge of market conditions, rarely occured. Neither for that matter, did perfect monopoly wherein buyers, unable to find substitutes paid a price selected by the monopolist. What usually happened was something in between the extremes of perfect competition and monopoly.

A.: In what way did Professor Robinson refer to this kind of trade?

L.: She referred to this kind of trade as imperfect competition. Robinson's «Imperfect Competition» described markets in which sellers had more freedom to determine prices than they would have under perfect competition, but less than they have under pure monopoly. They had this freedom either because their products were sold under conditions of monopolistic competition, or oligopoly. Are there any weaknesses of capitalism?

A.: Joan Robinson regarded imperfect competition as a major weakness of capitalism. Why? By commanding a higher price than they might have under perfect competition, she said, businesses earn higher returns while consumers have to find ways to do with less. Meanwhile, the economy operates at levels under its capacity to employ workers and produce goods and services.

L.: She concluded that conditions of underproduction and unemployment inevitably lead to periodic recessions and political unrest.

9. Make up your own dialogue using the following expressions:

perfect competition, to enter the market, to accomplish a goal, single management

to be engaged in the same business, collusion, to be interested in controlling as much of a market, merger

10. Change the following sentences using the Passive Voice according to the model:

Model: The vertically integrated firms are now buying raw materials from the companies they own. Raw materials are being bought now by the vertically integrated firms.

1. Patent protections are creating another barrier to trade. 2. Privately owned firms are providing an essential public service. 3. Consumers and producers are exchanging the goods in many competitive markets at this time. 4. Businesses are developing a service now. 5. The ice-cream company is driving down the prices.

11. Replace the infinitives in brackets by the Present Continuous Tense (the Passive Voice):

1. Higher returns (to earn) by business. 2. The principal kinds of market structures (to describe) now. 3. The customers (to treat) in the best way. 4. The wealth (to use) to dominate the oil market at this time. 5. The patent holder (to pay) now for permission to use the process or find a new method of production not covered by existing patent.

12. Translate into English:

1. Книжка друкується, доки він читає газету. 2. Ціни знижуються ними в цей час. 3. Його товар продається зараз в умовах монополістичної конкуренції. 4. Де той чоловік? Його наймають на роботу. 5. Однакові послуги надаються і товари продаються зараз різними фірмами.

13. Communicative situations:

1. Mergers of two or more competing firms, as well as of firms that are in competition with one another, have been increasing in recent years. We know that new investment adds capacity to the supply of goods and services. It also may increase competition. Expansion by merger, on the other hand, does not add to supply or capacity, and it may reduce competition. Mergers, however may result in greater efficiency in the future.

a). Explain how mergers may result in greater efficiency.

b). Support the argument that mergers lead to greater inefficiencies.

c). When would you favor, and when would you oppose, mergers?

2. General Mills is, among other things, a major producer of breakfast cereals, ALCOA produces aluminum, and Lovitt Farms, Inc. is a major wheat grower. With respect to each of these firms, compare:

a). The market in which they operate.

b). The relative importance of price in their respective markets.

c). The extent to which product differentiation and price leadership are factors in their markets.