Question

Question 2 Several Governments in CARICOM nations are reluctant to allow the provision of telecommunication services by multiple providers. They prefer that a Government Agency provides these services as they believe that consumers will be protected. However the revenue they gain should not be ignored as a possible motive. A recent study found that 8 countries out of the 15 in the CARICOM nations’ have telecommunication services being provided by the a state company. For example, in St. Lucia, De Phone is the sole provider of telecoms. They offer discounts to senior citizens and students and also provide a lower price for individual who purchase multiple plans. Of note, the remaining CARICOM nations, including Trinidad and Tobago, have opened their markets to competition. These countries have seen increased advertising among competitors to market their product. i. State what market structure exists in St. Lucia and illustrate how equilibrium price and quantity determined in this industry. [4 marks] ii. Can excess profit be earned by De Phone in the long run. Explain. [3 marks] iii. Describe what is occurring in the following statement: They offer discounts to senior citizens and students and also provide a lower price for individual who purchase multiple plans. [4 marks] iv. State what market structure exists in Trinidad and Tobago. Explain if excess profit will exist in the long run.

Answer 1

A) the market structure in St.Lucia is a pure monopoly in nature and they determine the output and income on the basis of MR=MC and set a price above the demand curve inorder to get maximum profit

B) in the long run to they will not have any abnormal profit Chamberlain states that in the long run firms will get only a normal profit due to the entry of firms and product differentiation.

C) they are also follow price discrimination policy too. They are using perfect price discrimination

D)they are following monopolistic competition market structure