Two Problems and One Journal

Problem 1

An interesting example of strategic behavior comes from a 1997 article about Microsoft's investment in Apple (New Straits Times, 1997). The article is included in the Required Readings list. Facing tough anti-trust scrutiny from government agencies, Microsoft provided financial support to Apple in order to ensure Apple's survival and, therefore, to ensure that competitiveness in the industry remains. Moreover, the partnership with Apple provided an additional market for Microsoft's products - the MS Office and the IE products were to be bundled with the MAC OS as one of the conditions for this financing. Discuss this case in the context of market structure and strategic behavior. What market structure do these firms operate in? Why did Microsoft need to preserve competitiveness in the industry? What was Microsoft afraid of in the event that Apple did not survive?

Problem 2

Bulls Eye department store specializes in the sales of discounted clothing, shoes, household items, etc. similar to the offerings at a regular Walmart or Target. Bulls Eye is the only department store in Show Low and the nearest other discount retailer is Target, located 49 miles away in Eagar. Bulls Eye, therefore, has some market power in its local area. Despite having some market power, Bulls Eye is currently suffering losses. An analyst at Bulls Eye is recommending to the manager to raise prices, so that profitability can be improved. The manager is unsure of this strategy as recent data points to increasing numbers of individuals shopping more and more. What are the pros and cons of raising the prices at Bulls Eye and would that strategy be profitable?

Journal

Take some time to think about the ways in which your learning in this class relates to the real world. Has the knowledge you gained been valuable in helping you understand or evaluate events or policies? Are there any current events in the news that you can directly link to concepts or theories covered so far?

Guided Response:

Review the popular news websites listed in the Current Events required readings section for this week. In 300 words or more, discuss one current event article and explain how economic theory can be applied to analyze the information presented.