Water Supply Industry

Tutorial 7

1. Recent technological changes that have emerged in the Australian water supply industry within the last twenty years refer to aquifer storage and recovery and new technologies of irrigation. Technologies and methodologies of aquifer storage and recovery became the object of researches in terms of innovation activity of Australian firms, prevented droughts, and invoked the launch of new market entities. New technologies of irrigation improve the efficiency of agricultural firms in reserve of fresh water sources, foster farm machinery, and made firms’ activities free of GHG emissions. These changes contribute to the water supply and business improvement.

2. The internal processes of companies engaged in water supply include regular procedures of removal of the substances and contaminants. Treatment procedures are passed through pre-chlorination, aeration, coagulation, sedimentation, filtration, and disinfection with utilization of the developed technologies. Highly capital intensive and less labor intensive methods are the automated lines of waste-water and water treatment. A typical firm does not operate on a large scale, because the industry is divided on specialized enterprises.

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3. The fixed costs of water supply are utilities, salary management personnel, and insurance payments. The variable costs include transport costs, electricity costs cleaning automatic lines, and the cost of disinfectants.

4. In order to increase production in the short run, a water supply firm should use the ease of obtaining a license on water supply, the use of advanced disinfectants, and development of cost-effective technologies.

AVC and ATC curves have U-shaped forms. If the average variable costs per unit are above the meaning of marginal costs, they decrease along with additional unit of output. As total costs are the sum of variable and fixed costs, they follow the shape of average variable costs. Rising branch of MC curve intersects AVC and ATS at their points of their minimal volumes.

6. Increased demand for the desalinated water will invoke intensification of particular filters and water utilities in the longest term. The short run would be likely from one to three years to be for water supply industry.

Tutorial 8

1. Economies of scale is crucial for water supply industry, as large volumes of treated water are the norm for a typical firm. For example, first, lesser volumes do not load production capacity and reduce their effectiveness. Second, the scale effect reduces the average fixed costs, making the price of services more moderate.

2. Diseconomies of scale in the industry are possible. For example, doubling the number of attracted water systems leads to a less than proportional increase in the volume of fresh water perfused.

3. LATC curve implies the curve that envelops of an infinite number of short-term curves indicated the average costs of water supply production, which contact with LATC in their points of minimum. LATC shows the lowest cost of unit produced which can provide any volume under the conditions of time for the changes in the factors of water supply production.

4. The water supply industry of Australia differs from the market with perfect competition, as water supply is provided by the existence of several companies operating in this market. In Australia, it is rather an oligopoly concentrated in Sydney, Melbourne, the Gold Coast, and Adelaide. In addition, state-owned companies regulate this market through public utilities. This industry is not perfectly competitive as the water treatment in Australia is strongly regulated.

5. A price in a perfectly competitive industry is established through a focus on production costs and overall price level in the water supply industry. The volume of products sold and supplied is substantiated by the average demand in the area and access to water.

Tutorial 9

1. A water supply firm in terms of a perfectly competitive industry intends to maximize its profits. In the short term, this situation is possible. Therefore, profits can be negative, positive, or zero. The short run can challenge a firm in the water supply industry by negative economic profit as it decided to put the price exceeding variable costs in average. For all typical firms in a perfectly competitive market, MR will be equal to the level of a price.

2. It is possible for a typical firm in the Australian economy to enter a perfectly competitive market in order to manage positive economic profit in the long run, but they earn zero profits. This long-run equilibrium is in the point of intersection of the curves of demand and marginal costs and the minimum of AC curve.

3. The efficiency of the water supply industry in Australia determines the firm’s output to each input factor, water volumes supplied per employee, labor productivity, operating expenditure, quality and quantity of properties connection, etc.. Although it includes numerical indicators, the industry’s efficiency is an aggregate phenomenon that gives common regular meaning of successful performance in the water supply industry.

4. The water supply industry is open for service providers invested in commercial utilities and engaged in collaboration with the contracts for treatment plants of the country. In order to pursue more economic treatment to water utilization, customers are attracted by advertising, appliance redesign, etc. Firms use a wide range of promotion. Firms prefer to spend available funds on better production as well as research and development in order to improve water quality and apply progressive technologies of its rational use, although research and development would be a priority than the developing new services that are interconnected though.

Tutorial 10

1. The water supply industry showed a monopoly market structure, when the use and supply of water to the population was carried out through state-owned companies. The modern industry is not a monopoly, as it admitted the private sector of services’ providers of water supply in different strategic areas of Australia, although its economy is deprived of similar industry.

2. In a monopoly industry, firms can negotiate the price, and volume of production can be distributed according to local demand given its restriction character. However, this industry is still regulated by the state regulatory (the Constitution of Commonwealth, the Water and Climate Change Ministry, etc.) in contrast to the private monopoly industry with free pricing.

3. A firm in a monopoly industry may earn an economic profit or minimize losses due to the production of such volumes that coincide with the equation of marginal costs and revenues. If the meaning of ATC is below the price in the market, a firm will get profits.

A private monopoly establishes market price, while a regulated monopoly depends on the fixed rate of profit.

4. The long run shows the equation of market price and average total costs. Thus, marginal revenues equal the related costs, as it shown in figure 10.2. Normal profit of a firm in a regulated monopoly increases, while private monopoly is challenged by average total cost, equation with the short run, and the emergence of new entrants.

5. The economic efficiency of the water supply industry distinguishes from the economic efficiency of a perfectly competitive industry by the similar amount of inputs and outputs, the same low allocative efficiency, and higher dynamic efficiency during time.

6. New firms are welcomed to the industry if the volumes of drinking water are easily used. Although Australia strongly regulates water consumption, new firms unlikely to benefit much. Increased demand will invoke the entrance, but not in the case of Australia.

Tutorial 11

1. The water supply industry experiences single-governance of state-owned companies that formed monopoly on the water treatment. Comparing with other industries, grain growing industry is the industry of monopolistic competition.

2. In a monopolistic competition industry, firms can negotiate the price, and volume of production can be distributed according to local demand in view of its restriction character. However, the state regulatory (the Constitution of Commonwealth, the Water and Climate Change Ministry, etc.) regulates the industry in contrast to the private monopoly industry with free pricing.

3. A firm in a monopolistic industry may earn an economic profit or minimize losses due to the production of such volumes that coincide with the equation of marginal costs and revenues. If the meaning of ATC is below the price in the market, the firm will get profits.

4. The long run shows the equation of the market price and average total costs. Thus, marginal revenues equal the related costs, as it shown in figure 11.2. Normal profit of a firm in a regulated monopoly increases, while private monopoly is challenged by average total cost, equation with the short run, and emergence of new entrants.

5. Comparing to efficiency of the café and coffee shop industry and a perfectly competitive industry, the water supply industry has acute coincidence of inputs with outputs, higher dynamic efficiency, and lower allocative efficiency.

6. New firms are welcomed to the industry if the volumes of drinking water are easily used, but they unlikely will, because Australia strongly limits the water demand and consumption. Increased demand will invoked the entrance, but it seems complicated in Australia. Significant sums are paid to advertise water supply services. The amount of ads includes a wide range of tools. Funds are preferable in research and development than production processes or development of new products.

7. The industry determines the existence of state-owned companies, particularly, treatment plants that were the major providers of water supply services. Water supply is more likely an oligopoly industry than other industries in Australia.

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