The Basics of the U.S. Economy, Free Essay in Economics

The US economy is a highly-developed nixed economy, and it is globally the largest economy by nominal Gross Domestic Product (GDP). As pointed out by the IMF, it also the sixth largest economy by the purchasing power parity (PPP). Moreover, the US dollar is commonly used in international transactions, and it is recognized as the world's common currency. Notably, the United States economy is fueled by a well-developed infrastructure, natural resources, and high productivity. The US has one of the world's important and most influential financial markets such as the New York Stock Exchange. Service-oriented companies dominate the US economy in areas such as healthcare, retail, financial services, and technology. It is worth noting that the United States is the world's second-largest manufacturer and the leading country in higher-value industries such as chemicals, telecommunications, machinery, aerospace, and automobiles. Currently, the economic freedom score of the United States is at 75.7, which is the eighteenth freest economy in the 2018 index. This preliminary briefing paper provides an insight into the basics of the US economy with a particular focus on the US. perspective on microeconomics.

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Private, Common, and Public Goods

Public good or service can be defined as a product or service that anybody can expend in the meantime. Appropriately, nobody can be prohibited from its use. Cases incorporate law enforcement, fire departments, doctor's facilities, roadways, TV, earthbound radio, public transportation, and public utilities (Yevdokimov, 2012). A public product needs to meet two criteria or two attributes. In the first place, it must be non-equal or not influence anybody's utilization of the great or administration. Also, it must be non-exclusive, or nobody can be hindered from consuming a similar good or service (Ahlersten, 2008).

On the other side, a private good or service is one that is competitive, where a consumer's use of a product or service hinders another's consumption of a similar product or service. Furthermore, a private product or service must be elite, where not every person can access the product or service (Ahlersten, 2008). Yevdokimov (2012) defines a private good or service as a product or service bought by an individual and that individual claims its ownership (Yevdokimov, 2012).

Because nobody can be prohibited from using public goods, it is far-fetched that any customer will take care of the whole expense of that product or service (Yevdokimov, 2012). Ahlersten (2008) clarifies free riding as individuals that devour a larger number of products or services that they have paid for (Ahlersten, 2008). Keeping in mind the end goal to create a public product or service, the government must partake in the cost of production. The government pays for the creation of public products and services through the tax collections from its citizens (Yevdokimov, 2012).

In the United States, for instance, the neighborhood police department would be viewed as a public good for various reasons. To begin with, it is considered non-rival. A person's utilization of police administrations does not exclude any other individual from using those administrations (Ahlersten, 2008). Furthermore, residents pay for police benefits through the accumulation of expenses by the local government (Yevdokimov, 2012). This is the reason when tax levies intended to enable pay for police services to fall flat at the voting shafts, and police administrations are normally a zone of administration that is diminished. Thirdly, no individual will pay for the whole cost of police administrations and residents depend on an aggregate gathering to help take care of the expense of these administrations. This means that a free rider exists (Yevdokimov, 2012). In any case, police insurance that is a private decent exists through private police assurance administrations. This kind of administration is selective to the rich concerning most normal individuals the cost is restrictive. Moreover, it is a private administration since it would bar any other person from using the administration. Once a product or service has been acquired it is claimed by an individual (Yevdokimov, 2012).

The neighborhood satellite TV service provided to a community could be considered either a private and public good or service. The service would be viewed as private since it is something that is obtained or claimed and devoured by an individual (Yevdokimov, 2012). Then again, nearby satellite TV administration can be viewed as public too. This is because the service can be devoured by various individuals in the meantime and the main restrictiveness exists given the link organization's region scope. A free rider exists with local cable services because no one individual is paying the whole cost to give the administrations (Yevdokimov, 2012).

On the off chance that one considers TV services transmitted through the air on data transfer capacity, it would be viewed a public good (Yevdokimov, 2012). While the government does not pay for this service through the tax collection, it is paid for through the sales of advertising through TV commercials. TV signal transmissions would be viewed as a public good or service since it is both non-exclusive and non-rival (Ahlersten, 2008). Considering the competitive nature private goods, it worth to say that they create a competitive scenario in the local and global market. This competition results in an increased rate of social and economic development.

Common goods, on the other hand, are referred to as rivalrous and non-excludable good. Classic examples of common goods are air and water. These can be polluted, affecting the economy of a country. Therefore, common goods should be preserved to a certain level by establishing regulations to avoid exploitation and pollution. The United States has put effective regulations to prevent pollution and exploitation of common goods. This has boosted the country's economic growth.

Market Structures and Costs of Production

A major part of the United States' economic makeup incorporates complex market structure. With a specific end goal to fathom the market structure, it is basic to see how monopolies, valuing and oligopolies play into the structure. There are four industrial markets that all organizations can fall within. Albeit uncommon, a monopoly can happen and even have a government-sponsored bolster. The lion's share of corporations will fall within the monopolistic of oligopoly markets. They will have numerous competitors but can have a couple of bigger firms leading the path in pricing structure. The monopoly of the United States Postal Service is an uncommon idea that is not conspicuous all through economic market structures

Perfect Competition

A perfect competition market is a structure where a large number of business firms produce the same product(s), in this way not one single competitor can control the value (Samuelson and Marks, 2012). Perfect competition is the reason for a solid economy in that costs are resolved exclusively by free market activity, and not by the manufacturer. Perfect competition is the ideal market structure because there is the best level of competition. It has been contended that idea of perfect competition is just a theory in that is continually alterable and open-ended (Makowski and Ostroy, 2011). New issues can rise out of firms into the economy, for example, non-profit organizations. Non-profit business can skew competition due to having the capacity to deliver a good or service at bringing down costs in light of their non-profit objectives. A perfect competition market is utilized more of a benchmark for judging financial markets in that it is rarely achievable.

Pricing Strategies

Pricing Strategies for perfect markets can be natural in that they are set from free market activity, and not impacted by the producer. Understanding the pricing structure is just understanding where market supply measures up to market demand. Firms in a perfect competition structure are valued takers, in that they do not affect the price. (Samuelson and Marks, 2012). A firm will have a consummately versatile demand in that it can sell as meager or a significant part of the product with no impact on the value (Stigler, 1957). Since competition is offering the same exact item at a cost, the firm can't increase the cost as buyers will purchase from the competitors (Samuelson and Marks, 2012). Moreover, the firm can't diminish the price as it will then not make a profit.

Monopolistic Competition

Monopolistic competition is a blend of perfect competition, and pure monopoly in that organizations compete by offering items somewhat not the same as each other. (Samuelson and Marks, 2012). The items can have differences in their level of value, features, and additionally, services offered by them in which is the reason for firms to compete. To be viewed as a monopolistic rivalry, the market must have three essential highlights (Monopolistic Competition, n.d.). The primary component is that it needs numerous merchants or numerous organizations to promote much rivalry (Monopolistic Competition, n.d.). The number of dealers in the market should be sufficient that one company's activities don't largely affect the price structure of market (Samuelson and Marks, 2012). The second characteristic of a monopolistic market is item differentiation (Monopolistic Competition, n.d.). The items are comparable, but with some level of difference from firm to firm. Lastly, the entry into the market is free (Monopolistic Competition, n.d.).

Since the items offered are similar, business organizations are unable to determine the price of commodities, but ultimately must adhere to some basic principles. The idea of item differentiation, the company's demand curve is slightly down-sliding (Samuelson and Marks, 2012). This means the firm can somewhat change its price lower or higher which will pick up or lose a few clients. While the request may change marginally when the cost is raised or brought down somewhat, not all clients will purchase progressively or dissuade to a competitor. This is because of ideas, for such as brand loyalty and the slight differences in items. Purchasers may think a specific item is worth somewhat more cash than a comparative one.

Oligopoly

As defined, an oligopoly is a market structure in which a couple of firms dominate but has the potential for some, small firms to operate within the market (Oligopoly, n.d.). A firm can be recognized as an oligopoly by the use of the concentration ratio. The concentration ratio measures the extent of the aggregate market share the firm controls. The most widely recognized concentration ratio is the four-firm which premises its outcomes on the main four firms in the market (Samuelson and Marks, 2012).

There are a few barriers for new businesses to enter an oligopoly market. Since the market is determined by a couple of best firms ruling over littler competitors, entry, can be expensive. Factors, for example, high setup costs, high innovate costs, and not having the capacity to access scarce resources bigger competing firms can be altogether cases of natural barriers to entry (Oligopoly, n.d).

There are also simulated hindrances to entry caused by rival firms in an Oligopoly. Since competing firms are so substantial, they have more knowledge and assets than entry firms. These assets enable them to have better publicizing, solid client dedication, and greater adaptability with their prices (Oligopoly, n.d). A top level firm in an oligopoly can bring down its costs incidentally keeping in mind the end goal to drive out littler competitors. These organizations utilize a strategy called limit pricing which involves them setting the pri...