Industrial Policy

Question 1

What is the difference between the goals of industrial policy ➕ that of regulation or antitrust?

Answer 1

1. Industrial policy is meant to strengthen the market position of a firm or industry with respect to the foreign firms.
2. The antitrust or regulations are meant to promote competition.

Question 2

Success stories of industrial policy?

Answer 2

1. Airbus Industry ( a consortium backed by four European Countries) has been able to give a cut to cut competition to Boeing in the airline industry because of the support it gas received from the respective governments over the past 3 decades.
2. MITI is the 🇯🇵 Japanese Ministry of Industry and Foreign Trade had supported the semiconductor industry of Japan helping it in becoming the world leader in semiconductors.

Question 3

The failed story of Industrial policy?

Answer 3

The 1980s project to build the fifth generation computers to compete and defeat the American competitors was a major flop story of industrial policy.

Question 4

What is oligopoly?

Answer 4

Oligi = few
Polein = to sell

A market structure Characterized by few sellers, more than two, of differentiated or undifferentiated products.

Undifferentiated= barrels of oil selling firms , firms selling an ounce of gold
Differentiated = firms selling same products with differentiated features
* automobile industry - all produce the same product that us cars vut with different makes and models.

Question 5

Types of oligopoly?

Answer 5

1. Pure or perfect
2. Imperfect or differentiated oligopoly
3. Collusive oligopoly
4. Non - collusive Oligopoly

Question 6

Pure or perfect oligopoly?

Answer 6

Firms producing homogenous products such as the
• cement
• steel
• aluminum
• chemicals
though in many cases its difficult to exist

Question 7

Imperfect oligopoly?

Answer 7

Firms producing differentiated products such as
1. Passenger cars
2. Cigarettes
3. Soft drinks
these have the close substitutes to each other

Question 8

Collusive oligopoly?

Answer 8

Firms cooperating with one another in determining the price or output or both.

Question 9

Nin - collusive oligopoly?

Answer 9

When the firms in the market of oligopoly compete with one another thats what ~ is.

Question 10

Non collusive model of oligopoly - Characteristics?

Answer 10

1. ~ explains the price ir output determination.
2. Firms attempt to collude rather than Competing.
3. While colluding these firms function as monopoly and therefore, enjoy benefits of higher profits over long run.

Question 11

Types of collusions in non collusive model of oligopoly are?

Answer 11

1. Overt - such collusions mean when there are ni attempts made to hide agreements, like tade associations formed by firms such as Association of Petrol Retailers.
2. Covert - when the agreements are attempted to be hidden to avoid detection from regulators such as when fixing prices.
3. Tacit - when firms act in concert without formal or informal agreements ( to escape detection from the authorities through means of reduced competition such as one firm leads while others simply follow it)
   * all firms do understand the strategy but there is no record/ agreement to prove it.