Exercises

Ex.3. Find where in the text it is said about the points given below. Put down the number of the paragraph.

1. The aim of positive economics;

2. Examples of positive economics in action;

3. The statement that combines positive and normative economics;

4. The usage of positive economics;

Ex.4. Find the terms in the text which designate the following:

1. the branch of economic study that deals with objective or scientific explanations of the working of the economy;

2. the branch of economic study that offers prescriptions or recommendations based on personal value judgements;

Ex.5. Say if the following statements are true or false:

1. In studying economics it is important to distinguish two branches of the subject.

2. Positive economics is similar to the natural sciences such as physics, geology or astronomy.

3. Normative economics is based on the search for objective truth.

4. Nothing can be made about the resolution of disagreement in normative economics.

5. Economics can be used to show that one of these normative judgements is correct and the other is wrong.

6. Society might have to devote a great deal of resources to providing check-up facilities, leaving less resources available than had been supposed to devote to improving the environment.

7. Normative economics can be used to clarify the menu of options from which society must eventually make its normative choice.

Ex. 6. Find the answers to the questions in the text. Put down the number of the paragraph:

1. What does positive economics deal with? What is its aim?

2. With what sciences can we compare positive economics? Why?

3. What does normative economics offer?

4. Why is there no way that economics can be used to show that one of these normative judgements is correct and the other is wrong?

5. What can positive economics be used to?

Ex.7. Make up a plan covering the main ideas. Discuss the text according to the plan.

Text 2 Monopoly

Ex. 8. Read and memorize the following words, words combinations and word-groups:

viable – життєздатний

cartel – картель

sanctioned – затверджений

domestic constituency – внутрішня клієнтура

natural monopoly – природна монополія

marginal cost – граничні витрати

relevant – доречний

kernel – сутність

a policy of laissez-faire – політика невтручання

vertical integration – вертикальна інтеграція

horizontal integration – горизонтальна інтеграція

eliminate – усувати

takeover – захоплювання

exert – впливати

asymmetric – несиметричний

undergo – зазнавати

conjectures = assumptions - припущення

extract – здобувати

complementary - додатковий

Exercise 9. Read and translate the whole text with a dictionary orally. Translate paragraphs 1,2,3, 4 in writing. Do exercises after the text.

1. In economics, a monopoly (from Greek monos , alone or single + polein , to sell) exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. The verb "monopolize" refers to the process by which a firm gains persistently greater market share than what is expected under perfect competition.

2. A monopoly should be distinguished from monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods.

3. A government-granted monopoly or legal monopoly is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic constituency. The government may also reserve the venture for itself, thus forming a government monopoly.

4. A natural monopoly is defined as a theoretical situation in which production is characterized by falling long-run marginal cost throughout the relevant output range. In such situations kernel, a policy of laissez-faire must result in a single seller.

5. A monopoly may be created through vertical integration or horizontal integration. The situation in which a company takes over another in the same business, thus eliminating a competitor (competition) describes a horizontal monopoly. While a vertical monopoly involves the takeover of upstream suppliers and/or downstream buyers.

6. Assumptions in modeling monopolies include:

• No close substitutes: A monopoly is not merely the state of having control over a product; it also means that there is no real alternative to the monopolized product.

• A price maker: Because a single firm controls the total supply in a pure monopoly, it is able to exert a significant degree of control over the price by changing the quantity supplied.

7. Other common conjectures in modeling monopolies include the presence of multiple buyers (if a firm is the only buyer, it also has a monopsony), an identical price for all buyers, and asymmetric information.

8. A company with a monopoly does not undergo price pressure from competitors, although it may face pricing pressure from potential competition. If a company raises prices too high, then others may enter the market if they are able to provide the same good, or a substitute, at a lower price. The idea that monopolies in markets with easy entry need not be regulated against is known as the "revolution in monopoly theory".

9. A monopolist can extract only one premium, and getting into complementary markets does not pay. That is, the total profits a monopolist could earn if it sought to leverage its monopoly in one market by monopolizing a complementary market are equal to the extra profits it could earn anyway by charging more for the monopoly product itself.

10. However, the one monopoly profit theorem does not hold true if there exist:

• Stranded customers in the monopoly good.

• Poorly informed customers.

• High fixed costs in the tied good.

• Economies of scale in the tied good.

• Price regulations for the monopoly product.

Exercises

Ex.10. Find where in the text it is said about the points given below. Put down the number of the paragraph:

1. the main characteristic of monopolies

2. the difference between cartel and monopsony

3. types of monopolies

4. the ways of creating monopolies

5. common assumptions in modeling monopolies

6. the idea of “the revolution in monopoly theory”

7. conditions when the monopoly profit theorem does not hold

Ex.11. Find the terms in the text which designate the following:

1. the process by which a firm gains persistently greater market share than what is expected under perfect competition

2. a market form in which there is only one buyer of a product or service

3. a form of oligopoly in which several providers act together to coordinate services, prices or sale of goods.

4. a type of monopoly which is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic constituency

5. a type of monopoly which is defined as a theoretical situation in which production is characterized by falling long-run marginal cost throughout the relevant output range

6. the situation in which a company takes over another in the same business, thus eliminating a competitor

7. the situation in which the takeover of upstream suppliers and/or downstream buyers is involved

8. the state of having control over a product and there is no real alternative to the monopolized product

Ex.12. Say if the following statements are true or false:

1. A monopoly exists when a specific individual or enterprise has sufficient control over a particular product or service.

2. The verb "monopolize" refers to the break by which a firm gains greater market share than what is expected under perfect competition.

3. A cartel is a form of monopsony.

4. A government-granted monopoly is sanctioned by the state.

5. A monopoly may be created through vertical integration only.

6. A company with a monopoly undergoes price pressure from competitors.

7. A monopolist can extract only one premium, and getting into complementary markets does not pay.

Ex 13. Find the answers to the questions in the text. Put down the number of the paragraph:

1. In what conditions does a monopoly exist?

2. What does it mean “to monopolize’?

3. Does monopoly differ from monopsony/cartel?

4.What does a government-granted monopoly provide?

5. How can a natural monopoly be defined?

6. What types of integration are there in monopoly?

7. What do assumption in modeling economics include?

8. What is the idea of the “revolution in monopoly theory”?

9. Under what conditions does not the one monopoly profit theorem hold true?

Ex. 14. Make up a plan covering the main ideas.

Варіант 3

Text 1. Oligopoly

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

entity – юридична особа

market participant –економічний суб’єкт

collusion – (таємна) угода між партнерами

concentration ratio – показник концентрації

trade practice – торгова практика

collude – таємно змовлятися

inherent –притаманний

excessive level – надмірний ступінь

stifle – стримувати

brewing industry – промисловість пивоваріння

staggering – вражаючий

unprecedented – безприкладний

emergence – поява

Exercise 2. Read and translate the whole text with a dictionary orally. Translate paragraphs 1,2,3, 4 in writing. Do exercises after the text.

1. An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for few (entities with the right to sell.) Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. The decisions of one firm influence, and are influenced by the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. This causes oligopolistic markets and industries to be at the highest risk for collusion.

2. Oligopoly is a common market form. As a quantitative description of oligopoly, the four-firm concentration ratio is often utilized. This measure expresses the market share of the four largest firms in an industry as a percentage.

3. Oligopolistic competition can give rise to a wide range of different outcomes. In some situations, the firms may employ restrictive trade practices (collusion, market sharing etc.) to raise prices and restrict production in much the same way as a monopoly. Where there is a formal agreement for such collusion, this is known as a cartel. A primary example of such a cartel is OPEC which has a profound influence on the international price of oil.

4. Firms often collude in an attempt to stabilize unstable markets, so as to reduce the risks inherent in these markets for investment and product development. There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place (although for the act to be illegal there must be a real communication between companies) - for example, in some industries, there may be an acknowledged market leader which informally sets prices to which other producers respond, known as price leadership.

5. In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching perfect competition. The competition in an oligopoly can be greater than when there are more firms in an industry if, for example, the firms were only regionally based and didn't compete directly with each other.

6. The welfare analysis of oligopolies suffers, thus, from sensitivity to the exact specifications used to define the market's structure. In particular, the level of deadweight loss is hard to measure. The study of product differentiation indicates oligopolies might also create excessive levels of differentiation in order to stifle competition.

7. In the United Kingdom, the four-firm concentration ratio of the supermarket industry is 74.4% (2006); the British brewing industry has a staggering 85% ratio. In the U.S.A., oligopolistic industries include the oil, beer, tobacco, accounting and audit services, aircraft, military equipment, and motor vehicle industries.

8. Many media industries today are essentially oligopolies. Six movie studios receive 90 percent of American film revenues, and four major music companies receive 80 percent of recording revenues. There are just six major book publishers, and the television industry was an oligopoly of three networks- ABC, CBS, and NBC-from the 1950s through the 1970s. Television has diversified since then, especially because of cable, but today it is still mostly an oligopoly (due to concentration of media ownership) of five companies: Disney/ABC, CBS Corporation, NBC Universal, Time Warner, and News Corporation.

9. In industrialized countries oligopolies are found in many sectors of the economy, such as cars, auditing, consumer goods, and steel production. Unprecedented levels of competition, fueled by increasing globalization, have resulted in the emergence of oligopoly in many market sectors, such as the aerospace industry. Market shares in oligopoly are typically determined on the basis of product development and advertising.

Exercises

Ex.3. Find where in the text it is said about the points given below. Put down the number of the paragraph:

1. the definition of oligopoly

2. quantitative description of oligopoly

3. the notion of oligopolistic competition

4. reasons for firm collusion

5. the welfare analysis of oligopolies

6. the emergence of oligopoly in many sectors of the economy

Ex.4. Find the terms in the text which designate the following:

1. a market form in which a market or industry is dominated by a few participants

2. a small number of sellers who dominate in a market or industry

3. a market form in which there is a formal agreement for collusion

4. market leader which informally set prices

Ex.5. Say if the following statements are true or false:

1. An oligopoly is a market form in which a market or industry is dominated by a great number of sellers.

2. Each oligopolist is aware of the actions of the others.

3. Oligopolies may employ restrictive trade practices (collusion, market sharing etc.) to raise prices and restrict production.

4. There is a formal agreement for collusion to take place between oligopolies.

5. The competition in an oligopolies can be less than when there are more firms in an industry.

6. The study of product differentiation indicates oligopolies might also create excessive levels of differentiation in order to stifle competition.

7. In industrialized countries oligopolies are found in many sectors of the economy.

Ex 6. Find the answers to the questions in the text. Put down the number of the paragraph:

1. What is oligopoly?

2. How many participants can oligopoly consist of?

3. What does strategic planning by oligopolists involve?

4. What can give rise to a wide range of different outcomes?

5. Why do firms often collude?

6. Are there any legal restrictions on collusion between oligopolies/cartels?

7. What does the study of product differentiation indicate?

8. What sectors of economy are oligopolies found?

Ex. 7. Make up a plan covering the main ideas. Discuss the text according to the plan.

Text 2. Pricing Policy

Ex. 8. Read and memorize the following words, words combinations and word-groups:

set the price – встановлювати ціну

cost- plus pricing – ціноутворення на основі собівартості

average costs – середні витрати

mark-up – націнка

allow for – враховувати

marginal-costs – граничні витрати

additional cost – додаткова вартість

charge a price – назначати ціну

standard price – типова ціна

cobbler - швець, що займається лагодженням взуття

price discrimination – цінова дискримінація

straightforward – відверто

penetration pricing – рівень цін, що забезпечує завоювання ринку

brand loyalty – прихильність споживача до певної марки товару

skimming price – ціноутворення по методу зняття вершків

price plateau - ціноутворення

loss leader pricing – тактика заниження ціни

Exercise 9. Read and translate the whole text with a dictionary orally. Translate paragraphs 1,2,3, 4 in writing. Do exercises after the text.

1. Price is a very important weapon that can be used to persuade consumers to buy. Price is one of many factors that determine the demand for a product.

2. How firms set the price of their goods and services is a complicated issue. A number of factors will affect the price a firm sets for its product, including such things as the cost of producing the product, the rival firms’ prices, the type of product and the desired market share of the company.

3. The most common pricing methods adopted by firms are:

1. Cost- plus pricing is a very simple method and is perhaps the most common. A firm may calculate its average costs of producing a product and then simply add a profit “mark-up”, say 10%, on to average costs. This mark –up could be changed to allow for the effects of competition and economic conditions, e.g. where there is a lot of competition this mark-up may be lowered or when business is good the mark-up could be raised.

4. 2. Marginal-cost pricing differs from the above in that the firm looks not at its average costs but at marginal costs, i.e. the firm calculates the additional cost of producing the next unit or set of units of output and the firm charges a price (plus a “mark-up”) according to the marginal cost. A typical example is found in the repair business. There appear to be no standard prices for repairing shoes. What tends to happen is that the cobbler examines the shoes and makes a quick estimate of how much material and time it will take to repair them. Larger shoes, those made of leather and those in greater disrepair have a higher marginal cost and therefore a higher price is charged for their repair.

5. 3. Several firms are able to charge different prices for a similar product. This is known as price discrimination. British Rail (BR), for example, charges different consumers such as businessmen and women, children, senior citizens and students different prices and also charges different prices according to the time of the journey, e.g. peak, off-peak, weekly and weekend. British Telephones (BT) price discriminates according to the time of day, week and distance of the call. The price to the consumer is made up of two elements: a fixed charge or quarterly rental, which is designed to cover BT’s fixed costs, and a variable charge related to the use of the phone. The ability of a firm to price discriminates on whether it can split or segment its market. In the case of BT and BR this is quite straightforward. Other industries and firms also price discriminate, e.g. the breweries charge different prices in the different regions of the country, cinemas offer cheap tickets for afternoon and late shows, and the Electricity Boards operate an Economy 7 system where consumers pay less for nighttime electricity.

6. In addition to adopting particular pricing method, a firm can also follow a number of pricing strategies or tactics. The more common of these include:

7. Penetration pricing is a tactic adopted by a company when it is first entering a market and is trying to establish a market share. It tends to be used where there is very little or no consumer “brand loyalty” and the demand for the goods is price elastic.

8. Skimming price is where a firm charges a high price for a product in order to “skim” the “top end” of the market. It is most likely to be found where the product is new and consumers have not had a chance to establish a “price plateau”. This refers to the price that consumers expect to pay for a product, e.g. would anybody expect to pay 40p for a standard size Mars bar? Clearly this would be above the price plateau. When products are new, a price plateau has not had the chance to be established and some consumers are willing to pay a high price to buy the new product because of its novelty value.

9. Loss leader pricing is when firms offer prices below the cost of producing the item in order to encourage the sale of the products. Supermarkets frequently adopt this tactic to encourage people into the stores so that once inside they may buy additional items on impulse.

Exercises

Ex.10. Find where in the text it is said about the points given below. Put down the number of the paragraph:

1. the main idea of cost –plus pricing

2. the main concept of marginal cost-pricing

3. the meaning of price discrimination

4. tactic of penetration pricing

5. tactic of loss leader pricing

6. tactic of skimming pricing

Ex.11. Find the terms in the text which designate the following:

1. a very important weapon that can be used to persuade consumers to buy, one of many factors that determine the demand for a product

2. pricing method in which a firm may calculate its average costs of producing a product and then simply add a profit “mark-up”

3. pricing method in which a firm looks not at its average costs but at marginal costs

4. firm’s ability to charge different prices for a similar product

5. a tactic adopted by a company when it is first entering a market and is trying to establish a market share

6. a tactic where a firm charges a high price for a product in order to “skim” the “top end” of the market

7. a tactic when firms offer prices below the cost of producing the item in order to encourage the sale of the products

8. the price that consumers expect to pay for a product

Ex.12. Say if the following statements are true or false:

1. The cost of producing the product, the rival firms’ prices, the type of product and the desired market share of the company will affect the price a firm sets for its product.

2. Where there is a lot of competition mark-up may be raised or when business is good the mark-up could be lowered.

3. Marginal-cost pricing differs from the cost- plus pricing in that the firm looks not at its average costs but at marginal costs.

4. The ability of a firm to price discriminates on whether it can split or segment its market.

5. Penetration pricing tends to be used where there are many consumers “brand loyalty”.

6. When products are new, a price plateau has had the chance to be established and many consumers are willing to pay a high price to buy the new product.

7. Supermarkets frequently adopt the tactic of penetration pricing to encourage people into the stores.

Ex. 13. Find the answers to the questions in the text. Put down the number of the paragraph:

1. What is price?

2. What factors will affect the price a firm sets for its product?

3. What are the most common pricing methods?

4. What is the difference between cost- plus pricing and marginal-cost pricing methods?

5. What is price discrimination?

6. How do British Rail and British Telephones discriminate price? What elements is the price made up?

7. What pricing methods can a firm follow?

8. What is a price plateau?

Ex. 14. Make up a plan covering the main ideas.

Варіант 4

Text 1. Advertising Media

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

direct mail – розсилання реклами поштою

ad = advertisement - реклама

limitations – обмеження

geographical selectivity- географічний відбір, селективність

coverage – висвітлювання в пресі, по радіо

feasible – можливий

circulation costs – витрати на збут тиражу

pulp paper – дешевий папір

readership – коло читачів

market segmentation strategy – стратегія сегментації ринку

drawback – недолік

commercial – радіо – та телереклама

dubbing – дублювання

scoring – озвучування

ban – забороняти

Exercise 2. Read and translate the whole text with a dictionary orally. Translate paragraphs 1,2,3, 4 in writing. Do exercises after the text.

1. The function of advertising is to inform and influence people’s behavior, as the general goal of advertising is to increase sales.

2. The major media used for advertising are newspapers, television, direct mail, magazines, and radio. Each has strengths and weaknesses. Let us now examine the advantages and limitations of the some media.

3. The typical newspaper circulates in a limited and well-defined area, this offers advantages to the advertiser interested in geographical selectivity. Since almost everyone reads the newspaper, an intense coverage of the local market can be obtained. Newspapers offer great flexibility because ads can be inserted or removed with only a few days’ notice; this makes it feasible to feature prices in most newspaper ads. Circulation costs are low, and because most metropolitan areas have daily newspapers, messages can be presented frequently. But there are several significant limitations to newspaper ads. The paper has a short life – nothing is quite so stale as old news – so it is likely that advertising will have much influence beyond the day of publication. Newspapers are hastily read, most studies indicate that the average reader spends between 20 and 30 minutes on the paper. Therefore, a message has to make an impression quickly or not at all. Finally, newspapers, being printed on pulp paper, do not have the quality of reproduction and colour that can be achieved in magazine ads. This can be a disadvantage for some car and food ads where the illustration has an important role to play.

4. Although magazines now rank only fifth among the media in total dollar revenue, more manufacturers advertise rather in magazines than in any other medium. A particular advantage of magazines is their selective readership: most magazines appeal to some groups and not to others, such as magazines on hunting and fishing, skiing, jogging, automobiles, etc. a manufacturer can direct a message to the segment of the total market that represents the most potential and thereby have a minimum of waste circulation; in other words, the various specialized magazines enhance a selective market segmentation strategy. Magazines also offer a high degree of geographic selectivity.

5. Magazines are read in a leisurely fashion, compared with newspapers. Some, such as National Geographic and Fortune, may be kept for years. They are often found in doctors’ and “business” reception rooms, and thereby have a much wider readership than circulation figures would indicate. Most magazines are printed on good paper and provide excellent colour ads. But there are some limitations. Magazines lack flexibility: changes cannot be made for several weeks before publication date – a factor that discourages the use of price in most ads. The infrequency with which magazines reach the market, compared with other media, can also be a drawback.

6. Television has grown the most rapidly of the major media. It offers the great advantage of appealing through both the eye and ear and thereby permits demonstration as well as explanation. It offers tremendous impact; millions can be viewing a program and its commercials at one time.

7. On the other hand, television is extremely costly. A 30-second commercial on a top-rated network program can cost more than $100,000. Added to this are the costs of developing a commercial – rehearsals, filming, reshooting, dubbing, scoring, animation, printing – and these can add up to many more thousands. However, TV spot costs for a single station, as contrasted with network coverage for all stations, can vary widely and even cost as little as $100 for some shows with lower audience ratings.

8. It is apparent that TV is most attractive to low – price, repeat sale, mostly convenience goods manufacturers while magazines are strong with distillers and tobacco companies (who are banned from TV and radio). The automobile manufactures use both media.

Exercises

Ex.3. Find where in the text it is said about the points given below. Put down the number of the paragraph:

5. the general goal of advertising

6. the major media used for advertising

7. advantages and limitations of newspapers

8. advantages and limitations of magazines

9. advantages and limitations of television

10. commercial costs

Ex.4. Say if the following statements are true or false:

1. The function of ad is to increase sales.

2. Each media used for ad has strengths and weaknesses

3. Newspapers offer great flexibility because ads can be inserted or removed with only a few days’ notice.

4. The newspaper has a long life.

5. A particular disadvantage of magazines is their selective readership.

6. Magazines offer a high degree of geographic selectivity.

7. Main drawbacks of a magazine are lack of flexibility and infrequency of reaching the market.

8. Television offers the great advantage of appealing through both the eye and ear.

9. Television is extremely cheaply.

10. TV is most attractive to convenience goods manufactures and tobacco companies.

Ex. 5. Find the answers to the questions in the text. Put down the number of the paragraph:

1. What are the main types of advertising media?

2. What are the advantages and disadvantages of newspaper advertising?

3. What are strengths and weaknesses of magazine advertising?

4. What are advantages and drawbacks of television advertising?

5. What firms prefer magazine advertising? Why?

6. What is the most expensive advertising medium? Why?

7. Is it expensive to develop a commercial? Why?

Ex. 6. Make up a plan covering the main ideas.

Text 2. Distribution and Sales

Ex. 7. Read and memorize the following words, words combinations and word-groups:

distribution channels – канали поширення

retail outlet – торгівельна точка

wholesaler – оптовик

warehouse – зберігати на складі

retailer – роздрібний торговець

distribution costs – вартість реалізації

stocks – товарні запаси

storage costs – витрати зберігання

perishable – що швидко псується

distribution network – система збуту

fleet – парк (автомашин)

customer facilities – сервісне обслуговування споживачів

commission – комісійна винагорода

direct selling – продаж без посередника

sales force – торгові агенти

link – ланка

Exercise 8. Read and translate the whole text with a dictionary orally. Translate paragraphs 1,2 in writing. Do exercises after the text.

1. The term “distribution” is not confined to the physical distribution of goods from the producer to the consumer, e.g. road and rail transport. In the business context it also refers to the distribution channels, i.e. the sort of retail outlets that the goods and services are sold in.

2. Many industrial products and services are sold directly to the consumer or user, e.g. aircraft and lathes. Most consumer products are usually distributed through retail organizations. By tradition many manufacturers sell their products to a wholesaler who warehouses the goods until they are required by the retailer. This so-called full chain of distribution offers advantages to both the manufacturer and retailer. The manufacturer can mass-produce the goods, get the money for the goods straight away, and does not have to worry about storage and distribution costs. The retailer can order goods from the wholesaler and does not have to worry about holding large stocks. The full chain of distribution has disadvantages for the manufacturer and the retailer. The wholesaler does not have any particular incentive to promote the sale of the manufacturer’s goods, and the retailer will have to pay a higher price for the goods from the wholesaler than if they were bought directly from the manufacturer.

Some industries have cut the “middle-man” (wholesaler), and the manufacturer sells directly to the retailer. In other industries the wholesaler may sell the goods directly to the customer and no retailer is involved. Finally, the manufacturer may sell directly to the customer without a wholesaler or retailer being involved.