Nama : AINUN NAFIAH

NIM: 042949312
KELAS: 3A
TUGAS TUTORIAL 3
1.  To reduce the production cost, firms usually apply labour market flexibility.
a. What is the concept of labor market flexibility?
Answer:
A flexible labour market is one in which it is easy and inexpensive for firms to
vary the amount of labour they use, including by changing the hours worked by
each employee and by changing the number of employees. This often means
minimal regulation of the terms of employment (no minimum wage, say) and
weak (or no) trade unions.
b. How can greater flexibility be associated with lower rates of unemployment
and higher GDP per head?
Answer:
Opponents of labour market flexibility claim that labour laws that make workers
feel more secure encourage employees to invest in acquiring skills that enable
them to do their current job better but that could not be taken with that it
improves economic efficiency by leaving it to market forces to decide the terms
of employment.
2. Interventionist politicians usually allege market failure to justify their
intervention. Meanwhile, economists have identified four causes of market
failure. 
(a) Mention the causes of market failure
Answer:
causes of market failure.
1. The abuse of market power, which can occur whenever a single buyer or
seller can exert significant influence over prices or output (see monopoly and
monopsony).
2. Externalities, when the market does not take into account the impact of an
economic activity on outsiders. For example, the market may ignore
environment.
3. Public goods, such as national defence. How much defence would be
provided if it were left to the market?
4. Where there is incomplete or asymmetric information or uncertainty.
(b) how to solve the problem?
Answer:
1. Abuse of market power is best tackled through antitrust policy.
2. Externalities can be reduced through regulation, a tax or subsidy, or by using
property rights to force the market to take into account the welfare of all who
are affected by an economic activity.
3. The supply of public goods can be ensured by compelling everybody to pay
for them through the tax system.
4. Market information is important for balancing supply and demand.
3. Natural monopoly has little chance of being driven out of a market by more
efficient new entrants. Thus, regulation of natural monopoly may be needed to
protect their captive consumers.
a. How do you know about natural monopoly!
Answer:
Natural monopoly is when a monopoly occurs because it is more efficient for
one firm to serve an entire market than for two or more firms to do so, because
of the sort of economies of scale available in that market.
b. Give the example of natural monopoly!
Answer:
A common example is water distribution, in which the main cost is laying a
network of pipes to deliver water. One firm can do the job at a lower average
cost per customer than two firms with competing networks of pipes.
4. Big firms have outsourced a growing amount of their business since the early
1990s, including increasing off shoring work to cheaper employees at firms in
countries such as India.
a. What is meant by outsourcing?
Answer:
Outsourcing is some shifting activities that used to be done inside a firm to an
outside company, which can do them more cost-effectively.
b. Why is outsourcing done by some firms?
Answer:
Because a firm that out sources can improve its efficiency by focusing on those
activities in which it can create the most value; the firm to which it out sources
can also increase efficiency by specialising in that activity. That, at least, is the
theory.
5. For producers, the perfect world would be one in which they could charge
each customer a different price: the price that each customer would be willing to
pay.
a. Is it possible to implement price discrimination?
Answer:
To implement price discrimination is possible if an overall market can be
segmented into somewhat separate markets and the equilibrium price in each of
these markets is different, perhaps because of differences in consumer tastes,
perhaps because in some segments the firm enjoys some market power.
b. Can the price discrimination last for long?
Answer:
Price discrimination cannot last for long because if it is possible and profitable
to buy the product in a low-price segment and resell in a high-price segment.