Economics Homework Help

3. The
following facts characterize the furniture

industry
in the United States:39

a. The
industry has been very fragmented, so that

few
companies have the financial backing to

make
heavy investments in new technology and

equipment.

b. In
1998, only three U.S. furniture manufacturers

had
annual sales exceeding $1 billion. These

firms
accounted for only 20 percent of the market

share,
with the remainder split among 1,000

other
manufacturers.

c.
Capital spending at one manufacturer,

Furniture
Brands, was only 2.2 percent of

sales
compared with 6.6 percent at Ford

Motor
Company. Outdated, labor-intensive

production
techniques were still being used

by
many firms.

d.
Furniture manufacturing involves a huge number

of
options to satisfy consumer preferences,

but
this extensive set of choices slows production

and
raises costs.

e.
Small competitors can enter the industry because

large
manufacturers have not built up

any
overwhelming advantage in efficiency.

f. The
American Furniture Manufacturers

Association
has prepared a public relations

campaign
to “encourage consumers to part

with
more of their disposable income on

furniture.”

g. In
fall 2003, a group of 28 U.S. furniture manufacturers

asked
the U.S. government to impose

antidumping
trade duties on Chinese-made bedroom

furniture,
alleging unfair pricing.

h. The
globalization of the furniture industry

since
the 1980s has resulted from technological

innovations,
governmental implementation

of
economic development strategies

and
regulatory regimes that favor global investment

and
trade, and the emergence of

furniture
manufacturers and retailers with

a
capacity to develop global production and

distribution
networks. The development of

global
production networks using Chinese

subcontractors
has accelerated globalization

in
recent years.

Discuss
how these facts are consistent with the

model
of perfect competition.