Assignment: Maximizing Profits in Market Structures 1
What are the characteristics of each market structure?
A competitive market is many sellers that sell similar products with very little control over the market selling price. An example of competitive market structure is a gasoline station. There can be many gasoline stations in a certain mile radius, the more gasoline stations there are in a small area the higher the competitive the market. Monopolies:
Monopolies are a group of business people who act as one. Considerable power is in the company’s ability to set and influence prices. The power is determined by the demand curve cladding the company and with almost no competition. Monopolies have no public ownership. When the competition is low and a company is dominating the demand curve it creates a monopoly because competition is low competition is never nonexistent, there are no other companies who can produce the same or substitute product. Microsoft would be a monopoly because there are very few competitors. Microsoft is supervised by contracts and patents that create strong barriers for its potential competitors. Oligopolies:
Oligopoly is group of sellers, who work together and have some control over the prices of a commodity in which there are few independent providers. Assignment: Maximizing Profits in Market Structures 2
Negotiations are managed via contracts. Oligopoly is a market that controls a commodity and is dominated by a small number of firms that act on one behalf. How is price determined in each market structure in terms of maximizing profits? Competitive Market
In the competitive market no business has more market power than another. The environmental conditions measure and determine the market structure. No specific company has more power than the next. In a competitive market structure substitutes are common so competition can be easily adhered. Gasoline stations can be common in an area of town; the consumer will have many choices. The consumer will choose a gas station for their own personal reasons, maybe because the prices are lower, closer to their home or place of work or because they think higher prices means better quality. Monopolies are companies with exclusive certification, franchises, patient and/or trademarks and can dominate certain market structures. Because monopolies dominate certain market structures prices can be extremely high as output is lean, thus creating a much greater and unobstructed profit or revenue. Oligopoly
Assignment: Maximizing Profits in Market Structure 3
Oligopolies are firms do not have exclusive certification, franchises, patient and trademarks and patents. Failure and dissolution is greatly possible if the completion is not greatly monitored and appropriate action is not taken. Businesses that operate as oligopolies must be careful of its competition as not to price themselves in dissolution or failure, the competition must be scrutinized closely and prices comparatively administered to maintain and maximize its profits. How is output determined in each market structure in terms of maximizing profits? Competitive
Competitive markets decision to produce more of a product and what price to charge largely depends on how competitive the market is. A gasoline station has little or no choice on what price to charge. If the station is situated in a busy location where business is lucrative there is no reason to lower its prices, however, if the gasoline station is situated in a less traveled area and business is slower and less profitable the gasoline station will lower its prices to stay in the competition. Monopolies
Monopolies in their efforts to keep profits high and output limited, take no consideration of the customer. Occasionally the government will attempt to contain monopolies by enforcing price controls or taking over an established ownership.
Assignment: Maximizing Profits in...
Citations: and References
Garman E. T (1997). Consumer Economics Issues in America, 5th ed. Houston, TX: DAME Publications
Chapter D4, Oligopolistic Competition
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