Firm Type

I have been in the restaurant business on and off for 23 years. In that time I have been a server, a line cook, a floor supervisor, a kitchen manager and a FOH (Front of the House) manager. I am a culinary school graduate. I am currently a full-time student and part time baker for  my own cake shop. I really love the food industry. I love providing good service and I expect it whenever I eat out. I really enjoy great food and trying new cuisines. To say that I am critical when I eat out at a restaurant, whether it's quick service or if it's fine dining, is an understatement.

According to the National Restaurant Association's website the restaurant industry employs over 13 million people in over 960,000 restaurants nationwide. This is a service industry that both produces a good (food) and provides a service (hosting, serving, cooking, managing).   In chapter 5 of Principles of Microeconomics (6th edition, Mankiw) talks about food as having a "fairly inelastic demand because there are no good substitutes." Once you narrow the categories: fast food, coffee shops, self-serve ice cream shops, catering, take-out, casual dining, bakeries and many other types of food establishments, you will find more elasticity.

How does the restaurant industry price its products? Sure, it takes into account what their competitors are selling their products for, for example an ice cream shop has to stay competitive by not pricing their prices too high (or no one will buy) or to low (the business will not make any money and will probably lose money). Food cost, production, portion size, location (Beverly Hills, CA or Lansing, MI--there is a huge difference in the clientele) all play a part in how a restaurant prices its food.

The food industry market changes all the time. There are fads and trends that influence the restaurant business. Currently the "popular" thing in restaurants is organic, farm-fresh, local, made-from-scratch, gluten-free, and dairy-free foods. The economy definitely plays a part in how people eat. People are shying away from haute cuisine and fine dining (except for special occasions) and having to travel long distances for fancy foods. I think a lot of people are still eating out at fast-food restaurants or are staying at home and cooking for themselves. With grocery stores like Whole Foods and with the numerous cooking shows on the Food Network the everyday person is getting more comfortable cooking gourmet foods for themselves at home. Granted, not everyone wants to cook gourmet meals and probably don't have the time to cook this way on a daily basis.

"Restaurant PAC Mission." Web. 31 Mar. 2013. http://www.restaurant.org/advocacy/Support-Industry-Advocacy/Restaurant-PAC. 

"Top Trends for 2013.". Web. 31 Mar. 2013. Nationalrestaurantconsultants.com

Chapter 15 Reflections- Monopoly

MONOPOLY

First, let's explain what a monopoly is. A monopoly is a firm that sells a product where they are the only ones that sell that particular product or where there is no direct competition.                                                                                               

                                                                                                      

I've been watching a series on t.v. called "The Men Who Built America" that is on the History Channel. In this series we follow the stories of Andrew Carnegie, John D. Rockefeller, Cornelius Vanderbilt, J.P. Morgan and a few other men who were instrumental in the building of America in the 1800 and 1900's and embodied the capitalist mindset that the world thinks of when they think of the United States. Each of these men have their specialties whether it's in the oil business, the railroad system, steel, shipping or finance, they each dominated their field and became the ultimate monopolists. As monopolists they were the price setters not price takers. 

Andrew Carnegie
Scottish-American Industrialist
known for his expansion of the steel industry. 

John D. Rockefeller, Oil Tycoon.

Cornelius Vanderbilt
Amassed his fortune in the shipping and railroad industry.

J.P. Morgan
American banker and financier who dominated the world of finance.

In today's age we see companies such as Microsoft and Apple as being monopolies of sorts. Microsoft dominates the field on their software and Apple software only works with Apple computers, cell phones, and mp3 players. 

Sometimes the government will step in to prevent firms from becoming full on monopolies but sometimes the government gives a company exclusivity to produce a good or service. An example would be the drug companies. The textbook talked about drug companies being allowed to be monopolies because they encourage research. I understand where the government might think this and I realize there needs to be regulations within this industry but I can also see where there might be some manipulation on the part of the drug companies of the government when it comes to lobbying elected officials. It's a tricky business. 

I had never heard of a "natural monopoly" before. This is where a single firm is able to provide a good or service for less cost than two or more firms can. The company that immediately comes to mind is Walmart because it provides goods and services at very low cost but it does have competition with Target. "In some cases, the size of the market is one determinant of whether an industry is a natural monopoly." (Mankiw, 303). 

Trash removal is sometimes a government monopoly. I think this is because municipalities are often the one's putting trash service out to bid on behalf of it's residents. They do this to get the services for their residents at the lowest cost possible. My trash is removed by a single hauler, Waste Management, and this was chosen by the Town of Silt. Waste Management has great services, like single stream recycling that allows me to put all of my recyclables into one huge bin without having to sort it all out or go to another facility to take certain things.

“About the Series.” 2013. The History Channel website. Mar 28 2013, 3:06 http://www.history.com/shows/men-who-built-america/articles/about-men-who-built-america.

Chapter 12 Reflections- The Design of the Tax System

The U.S. Tax System

Progressive Tax

This is a tax for which high-income taxpayers pay a larger fraction of their income than do low-income tax payers.

Flat Tax

A system that applies the same tax rate to every single taxpayer regardless of income bracket. 

Income Tax

A tax based on the the amount of income one earns.

Consumption Tax

All income that is saved would not be taxed until the saving is later spent. 

Now that you have had a chance to think about tax systems which type do you prefer - progressive, flat tax, income, consumption - there are quite a few possibilities.  How do you think the concept of equity or fairness fits into a tax system?

My Thoughts

I personally like the idea of a flat tax, that way everyone, no matter what their income, would pay their equal share of taxes, say 10%. I do not think that those making more money should pay an unequally larger share of their hard earned money to take care of everyone else but their 10% would definitely benefit those who were making substantially less money anyway. I am absolutely against the idea of a Progressive Tax. The Income Tax does not encourage anyone to work any harder or try to save more because the taxpayer knows that the Federal government is just going to take half of their money anyway. I do like the part of the Consumption Tax that encourages people to save and that when you do finally spend some of that saved money it is at that time that you are taxed. 

We are never going to get away from taxes. We all benefit from the use of tax dollars, whether it's driving down a nicely paved road, having protection from police or military, or just being able to appreciate the beauty of our National Parks. I think there are benefits and downfalls to each of these tax systems but We The People are lucky enough to be able to vote for our representatives who hopefully have our best interests at heart!

If you want to read more about government expenditures one source is the Economic Report of the President, available online here: http://www.gpo.gov/fdsys/pkg/ERP-2012/content-detail.html.  

Chapter 11 Reflections- Public Goods and Common Resources

Public Good

Definition: "Goods that are neither excludable nor rival consumption. People cannot be prevented from using a public good, and one person's use of a public good does not reduce another person's ability to use it."  (Mankiw, 6th ed., pg. 218).

Example: Fireworks! Who doesn't like fireworks? No one can be excluded from enjoying a fireworks display. 

Fireworks display in Washington, DC

Costs of Providing the Good

There are several factors that go into the cost of providing a fireworks display. First you have to have insurance, hire a professional company to do the actual display and perhaps hire local police to patrol the area making sure that peace is kept, especially when a large crowd gathers. The fireworks company will either light the fireworks by hand or they will computerize the show. The size, the shape, and the amount of each of the shells that contain the fireworks will also be a factor. Some shows are even set to music! The time spent putting everything together will also determine the cost. A small show can run a few thousand dollars and the more elaborate shows like the 4th of July in Washington D.C. or Philadelphia can run into the 100's of thousands of dollars, maybe even millions! 

Some towns have a built in tax that helps pay for the display because so many people come from outside of those towns that everyone, especially the local businesses (restaurants, shops, hotels) really benefit from the influx of people. 

Other smaller towns have found that it just isn't in the budget to host a fireworks display and have discontinued them. Some have found a way around this and decide that they want to do fundraisers to keep the town fireworks displays going. 

Benefits of Providing the Good

A public display of fireworks provides a town or city, sporting event or any other special event feelings of joy, happiness, patriotism, and grandeur. It's a way of bringing a community or group of people together to enjoy. 

Photo from photoblog.nbcnews.com. 

Another way to have the good provided

Not all fireworks displays are paid for by local, state or federal monies nor are they just for one specific time period or group of people. Many times people like to have fireworks displays for their birthday, a wedding, an anniversary, on a cruise, at a baseball game. 

Final Thoughts

After reading this chapter I looked at public goods pretty much in the same way that I had before. We all can benefit from public goods and even though others may benefit more from certain goods its a win win situation for everyone. 

Chapter 10 Reflections- Externalities

Negative Externality

What is a negative externality? It is an action of a product on consumers that imposes a negative side effect on a third party. Also known as a "social cost."

Examples would be:
 A natural hot spring where people like to relax and enjoy the benefits of the water but those who live close by have to smell the "rotten egg" or sulfur smell that is emitted from the water. 

The hot springs pool in Glenwood, Colorado. 

An aluminum factory that emits pollution. Smoke from the factory is emitted into the air. People have to breath the air, therefore there is a health risk to those who breath the air.

 

My favorite example of a negative externality is noise pollution. Several examples come to mind:

1.  Living near an airport and having to deal with the constant noise of the airplanes flying over homes.
2. Living near a concert arena like the Pepsi Center or a sports stadium like Coors Field where you have to deal with the traffic noise and the roar of the crowds.
3. Living near an interstate where you have to deal with the sounds of traffic, horns, accidents, and sirens.
4. A neighbor throws parties on a regular basis and has no regard for those around them and plays their music at a ridiculously high volume. 

Could the problem be solved via negotiation (Coase Theorem)?  How or why not?

I think noise pollution is absolutely one of those negative externalities that can be solved by negotiations in most instances. Take for instance my example of the airport. When Denver International Airport was in its beginning stages of development it had been decided that because there had been so many noise complaints because of Stapleton Airport that the new airport would be built 23 miles from downtown Denver. It is also positioned so far from downtown because it gives the airport lots of room to expand and grow, unlike so many busy metropolitan airports like LAX or O'Hare. 

The neighbor who throws noisy parties can be asked by surrounding neighbors to please turn down the music because it's creating a disturbance or if these attempts fail then maybe the local police department can drop by and politely negotiate with that noisy neighbor to turn the music down!