EAns Prelim papers

Further explain how process innovation leads to market dominance 

• Patents give the owner the exclusive right to produce the good using the new process

• Ensures that other rivals would not be able to copy the innovation -> not have price advantage -> subnormal profit -> exit industry -> incumbent firm increase market share (NOT power) and dominant 

Subsidies (DONT FORGET) 

• SS increase -> surplus at original price level -> price falls 

• Even if consumers face imperfect information, they will increase consumption as prices are lower

Recovery in domestic demand in some regional economies -> increase AD in these economies and real GDP -> increase PP/W/A of SG trading partners -> DDx increase 

SSP can reduce BOTH cost-push and DD-pull inflation 

• Increase labour productivity -> increase PC -> yf increase -> alleviate DD-inflationary pressures as spare capacity increased 

• When AD increase, GPL will increase to smaller extent from P0 to P3 instead of to P2 

Deregulation EVAL

• Distribute more licenses 

• Eval: Patents prevent entrants from accessing information to develop production AND other BOE in pharmaceutical industry remains high even if there is more licenses -> still difficult for new entrants to join industry

Public education receptiveness eval (Elaborate MORE)

• They might hold on to preconceived fears about health screenings or follow the habits of family instead of the message of the campaign

• Advice by campaigns may still fall on deaf ears of many consumers

• Could also be due to campaign fatigue where consumers become numb to the message of the campaign or are doubtful of the government’s advice

Appreciation eval

X (NOT X-M) as a % of GDP is very high and economy is also highly reliant on imported inputs -> appreciation will significantly affect AD and AS

Final eval (deregulation VS MC-pricing)

• Depend on contestability 

• As pharmaceutical industry has a low degree of contestability, governments could improve the ease of entry and exit more significantly or improve the technology asymmetry between incumbents and entrants by reducing the length of the patents

• When faced with the threat of potential entry of rivals, incumbents may be more competitive and voluntarily lower prices

• Even if deregulation does not increase number of firms, contestability enable deregulation to be successful in achieving improved outcomes for society

1. ‘Buy up competition’ = acquisition 

2. CS: ALWAYS give area (even in firms question) 

X-inefficiency…

X-inefficiency increase in AC because of the lack of incentive to keep costs low due to complacency as there is low contestability 

1. Intervene in agrifood to improve productivity (MICRO): lower MCOP -> increase SS

• If use macro, MUST say: agrifood sector takes up a large proportion of countries total production activities

Merchandise trade…

Export revenue and import expenditure (X+M) 

Overconsumption tax…

Overconsumption tax: producer pass higher costs to consumer via higher prices -> consumers internalise the tax 

Public education to tackle externalities, need…

1. Public education to tackle externalities, MUST use moral suasion 

• Encourage consumers to take into account -ve externalities in their consumption of tourism services generated on the environment

Tourism quota to tackle overconsumption graph

Describe tourist quota

• Restrict the quantity of tourism services available to the socially optimal output where MSB = MSC

• Quota is represented as a vertical line at Q* indicating that tourism consumption cannot exceed this level

• Quota effectively caps the quantity of tourism services supplied, regardless of demand

• SS curve becomes perfectly inelastic at the quota level Q*

• The ‘new supply curve’ is the bold line SS’ and equilibrium price of tourism services is at where SS’ = DD at P*