Increased Domestic Oil and Gas Production

In tonight’s State of the Union speech tonight, President Obama is expected to call for increased reliance on domestic energy. In particular, the president will call for more oil and natural gas production. He call attention to decreased oil imports- although as the Wall Street Journal notes, this is mostly due to lessened demand in a still-feeble economy.  His call for increased fossil fuel usage- although domestic- will surely meet opposition from environmentalists. While increased oil and natural gas production has potential to create jobs, it carries great negative externalities. Both the extraction and subsequent burning of the fossil fuels cause pollution, raising marginal social costs of expanding production. While increasing production of oil and natural gas carries some benefits, I believe such benefits are outweighed by the environmental harm. As peak oil draws ever nearer, the U.S. is better off expanding the green energy sector and preserving the fragile environment than reverting to harmful fossil fuels. 

Market Structures- Oligopoly and Perfect Competition

Oligopoly: Verizon, AT&T, Sprint, Nextel, and T-Mobile

As demand for cell phones expanded, a clear oligopoly formed among a few cell phone providers. Though the companies provide essentially the same service, they do so with clear differentiations in service plans. Such differentiations are clear in the companies’ aggressive advertising campaigns. Given the significant obstacles to market entrance, primarily economies of scale, there are only a few service providers, including Verizon, AT&T, Sprint, Nextel, and T-Mobile. Recently, the companies have come under suspicion of collusion based on text-messaging prices, though all companies have denied colluding.

Perfect Competition: Orange producers in Florida

Companies supplying oranges meet many of the characteristics of a perfect competition. There are a many producers in the orange market, and they produce a standardized product. Producers rarely advertize, as their standardized products need publicity to differentiate them from the goods of other producers. Standardized products are supplied to the market as perfect substitutes, causing each firm to be a “price taker” and face a perfectly elastic demand curve for their product. Sunkist’s status as a member of a pure competition is solidified by the lack of obstacles to enter the orange market, and further, the lack of control over prices held by Sunkist and other producers. 

North Korea’s nuclear program, suspected weapon proliferation, counterfeit of U.S. currency, hostility towards U.S. journalists, and rampant human rights violations have heightened tensions between the adversaries.  Most recently, An Executive Order issued in April 2011, prohibited the importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea, and as of February 2011, the U.S. has not provided any aid to North Korea other than a small medical assistance initiative. As Kim Jon Un assumes the leadership position of his late father, policy analysts must reevaluate whether to push for improved communications and trade with North Korea. While there are always gains from trade, trade with North Korea at present offers little utility. With an economy that mirrors the nation’s general volatility, trade with North Korea would be unreliable given the market’s high elasticity. Further, income inequality plagues North Korea, as millions live in poverty while party supporters prosper. With many North Koreans living in destitution, the U.S. would make negligible profit as there is insignificant demand and North Korea's stagnant economy produces limited goods, few of which have potential to benefit U.S. consumers. Given the instability of the North Korean market and limited gains, the U.S. should not open trade with North Korea.