Course: Economics for Managers

Instructor: Philip Leatherwood, Senior Lecturer of Economics

Prepared by: Zhanna Mukhanova MBA – I year, ID – 20001068

 

Watch Industry in Russia

The former Soviet Industry was constituted by 22 plants of watch production. Now 2 of them belong to Belourussia and Armenia. All the rest plants are situated in Russian territory. Before the rest plants are situated in this industry, 80% of the market was grabbed by aggressive manufacturers from China and Hong-Kong. The 1998 sales have fallen 10 times in comparison with previous years sale. I think this industry can be taken as an example of monopolistic competition. The number of firms is 20. Among 20 plants, there are 5 leaders as follows: "Vostok" (Tatarstan), "Chayka" (Uglich), "Molniya" (Chelyabinsk), "Polet" and "Slava" (Moscow plants).

So what is the situation after the crisis? "Molniya" increases its export up to 10% and doubles total output because their pocket watches are turned out to be very attractive niche as a souvenir watches with corporate label, Their product is differentiated by their design and advertisement. "Slava" – the major famous producer of mechanical alarm clocks. For the 10 months of 1999, they made RR 83 lil – more than 40% sales increase.

"Vostok" – a leader on the market before and after the crisis as well. 45% out of 7.4 mil watches sold by Russian manufacturers belongs to "Vostok". "Vostok" quickly responses to the change in the customer’s preferences. In "Chayka" which was producing only watches for women they started to produce watches (wall), in other words it coped to expand the product range. In addition to the very traditional Chaykas’ women wrist watches, new types were introduced – now you can put "Chayka" on the floor or hang it on the wall. New watches constitute already 10% of the total production. The soon increase in quartz watches is expected.

As for quality, Chayka could not compete with Swiss producers, but as for Chinese and Hong-Kong producers, it could do something. Last crisis lifted prices up to the price range more than RR 200, which is the most attractive range for ordinary Russians. So, Chayka with RR 100-RR650 watches could fell better a little bit.

I have prepared some exercises for theoretical part of assignment.

 

 

 

MULTIPLE CHOICES

 

 

 

 

 

 

 

 

 

  1. Suppose that a firm is in short-run equilibrium and DD is the demand curve, the equilibrium price is

    1. OP3

    2. OP2

    3. OP1

    4. Zero

    5. None of the above

     

  2. Under monopolistic competition Price is

    1. equal to MC and exceeds AC

    2. less than MC and equal AC

    3. exceeds MC and exceeds AC

    4. none of the above

     

  3. Which of the following distinguishing features is not of monopolistic competition?

    1. a large number of firms each having little control over price, mutual interdependence is absent.

    2. entry to the industry is difficult

    3. economic rivalry entails both price and non price competition

    4. none of the above

 

TRUE OR FALSE

TF Firms under monopolistic competition have unlimited control over market price.

TF There is a tendency to earn a normal profit in the long – run under monopolistic competition.

TF Monopolistically competitive firms produce a standardized and homogeneous product.

TF The demand curve faced by a monopolistically competitive seller is highly and perfectly elastic.

TF In the short run the monopolistic competitive firms may either realize an economic profit or be faced with losses

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