...Evaluate the effectiveness of monopolistic competition and oligopolies in meeting the needs of producers and consumers. A market is a place where buyers and sellers meet to exchange money for goods and services. There are four market structures; perfect competition, monopolistic competition, oligopoly and monopoly. Each structure of market operates in their own ways with each with their own characteristics; each structure has its own number and size of the firms, the level of the competition, product differentiation and difficulty of entering new firms into the market. The two similar structures are monopolistic competition and oligopolies; although they are similar they still operate quite different to each other. Monopolistic competition is defined as the structure with many small firms selling products of similar kind, therefore lots of choice and lots of range which means that there are lots of substitutes. Due to the fact that there are lots of substitutes price plays an important role; if a firm has established some sort of brand name or store name it will be able to charge a slightly increased price, but yet a very high increase in price will result in decrease of its market share. As firms have a very limited control on price to gain more consumers firms are involved in strong non-price competition of quality, advertising, packaging, promoting brand names, etc… To enter into a monopolistic market is relatively easy as there is no established market. Examples of this...
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...TAYLOR’S COLLEGE SOUTH AUSTRALIAN MATRICULATION ACCOUNTING STUDIES - Jan. 2011 Intake Assessed Net Search Assignment (a) Name of the business Winstone Tiling Sdn Bhd (b) Type of the business(sole proprietor, partnership, private company or public company), Private Company (c) The range of goods and services it offer Ceramic Tiles (d) The area over which it operates - No 95, Jalan Perwira 2, Taman Perwira, 42500 Telok Panglima Garang. - No 49-0 & 49B, Lrg Bt.Nilam 1A, Bnadar Bukit Tinggi, 41200 Klang. - Lot 357, Batu 14 ½, Jln Banting, 42600 Sg.Jarom, Kuala Langat. - Lot 2737, Jalan Raja Nong/KS 2, Taman Perindustrian Sg. Jati, 41200 Klang. (e) Advantages and disadvantages of the business structure Advantages | Disadvantages | - Protection of Company NameThe choice of company names is restricted and, providing a chosen name complies with the rules, no-one else can use it. The only protection for sole traders and partnerships is trademark legislation.- TaxationSole traders and partnerships pay income tax. Companies pay Corporation tax on their taxable profits. There is a wider range of allowances and tax-deductible costs that can be offset against a company's profits. In addition, the current level of Corporation Tax is lower than income tax rates.-Shareholders/members have limited liabilityThey are only responsible for the number of shares which they own. To signify that the liability is limited, companies include the word Limited...
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...Week Three Student Guide In the third week, you will learn about the four market structures—pure or perfect competition; monopoly, monopolistic competition, and oligopoly—and the implications of the market structures for competitive strategies and profit maximization. You will participate in discussions that compare various market structures and their characteristics, evaluate the effectiveness of competitive strategies in market structures, and determine profit-maximizing strategies based on a market structure analysis. The topics incorporate Week One material related to market outcomes and prices & Week Two concepts, which focused on productivity and costs. This week includes activities that lead you to identify the market structure firms compete in and the factors that lead to these determinations. They also allow you to evaluate the effect of market structure on profit maximization in the short and long run. You will learn how to use graphs and charts of profit maximization in each structure. You learn how the market structure positively and negatively affects a firm and how the effectiveness of the competitive strategies in the structure affects the organization’s long-term profitability. Critical to this understanding is the fundamental concept that a firm maximizes profits where marginal revenues equal marginal costs. The ability to focus on the marketplace, an organization’s cost structure, and market structure on competitive strategies and profit maximization will...
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...Between Market Structures Simulation The “Differentiating between Market Structures Simulation” applied all four of the market structures to four major divisions of a fictitious transportation company called as East-West Transportation. The four divisions for the various products they transport are Consumer Goods Division, Coal Division, Chemical Division, and Forest Products Division. This paper will summarize the advantages and limitations of supply and demand, the effectiveness of structure, and will analyze how each market structure maximized their profits. The market structures represented in this paper are Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition. Perfect Competition According to the simulation the Consumer Goods Division operated in a market that perfectly competitive. There were several buyers and sellers, each of the sellers being a price taker and there were no barriers to entry. The limitations or advantages of the Consumer Goods Division are as follows. The competition is high so the demand for their service will be low. Continuing to supply this service would mean the company would have to spend more on improving the quality of its service so as to maintain and increase the demand. In the simulation, the first decision made was whether to cease operations in the Consumer Goods Division or to continue operations and minimize any losses. Monopoly The second scenario in the simulation the Coal Division had the viewer’s look how they...
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...Differentiating Between Market Structures The “Differentiating between Market Structures Simulation” applied all four of the market structures to four major divisions of a fictitious transportation company called as East-West Transportation. The four divisions for the various products they transport are Consumer Goods Division, Coal Division, Chemical Division, and Forest Products Division. This paper will summarize the advantages and limitations of supply and demand, the effectiveness of structure, and will analyze how each market structure maximized their profits. The market structures represented in this paper are Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition. Perfect Competition According to the simulation the Consumer Goods Division operated in a market that perfectly competitive. There were several buyers and sellers, each of the sellers being a price taker and there were no barriers to entry. The limitations or advantages of the Consumer Goods Division are as follows. The competition is high so the demand for their service will be low. Continuing to supply this service would mean the company would have to spend more on improving the quality of its service so as to maintain and increase the demand. In the simulation, the first decision made was whether to cease operations in the Consumer Goods Division or to continue operations and minimize any losses. Monopoly The second scenario in the simulation the Coal Division had the viewer’s look how they...
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...Strategy Simulation Game Name: University: Course: Section: Instructor: Date: Table of Contents Introduction 2 Pure Monopoly 2 Oligopoly 3 Monopolistic Competition 4 Perfect Competition 4 Relation with Porter's Five Force Model 4 Conclusion 6 References 7 Strategy Simulation Game Introduction This paper explains the use of economics in managerial decision making based on the simulation. It describes decision making process of management in different market structures. The main objective of an organization is to maximize the profits in each type of market structure. Quasar Computers has done extensive research for the development of optical notebook. In the Year 2003, the company launched the first all-optical notebook computer branded as 'Neutron'. Neutron uses energy saving optical technology that established it as the market pioneer (Tata Interactive Systems, n.d.). The following pricing and other decisions are taken for this product in the different market structures. Pure Monopoly Quasar was the sole seller for the new and unique computer technology that established monopoly market structure for it. In the monopoly, profit maximization occurs at the point where marginal cost and marginal revenue equate to each other (Baumol & Blinder, 2005). In this scenario, Quasar objective was to maximize the profits because of its monopolistic situation caused by the patent rights on all-optical technology valid for three years from 2003. Quasar was able to control the demand...
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...devices (Schneider, 2010). Thanks to the advancements in technology the rental portion is dwindling down from physical DVDs to digital downloads. It is simply more convenient to use a video game console, DVD player, or Blu Ray Player to access videos straight from home. Consumers are not limited to watching movies at home, since Netflix has developed the ability to view movies on smart phones or even tablet devices. The ability to watch a movie on demand is growing exponentially. Market Structure Due to fast increase in technology, Netflix is in an Oligopoly structure. One of the primary indicators that they are in this structure is that there are only four major firms in the video rental industry ("Economics Online", n.d.). The video rental industry can be determined to be controlled by Blockbuster, Comcast, Redbox, and finally Netflix. These companies are the only real major players in movie rental industry. Another indicator this is an Oligopoly is because of the barriers that need to be overcome to be able to break into this industry. There are very stringent copyright laws, which can be really restricting for a company trying to get into this exclusive industry. With these laws as a major barrier it is very costly to any companies attempting establish themselves into this market. Accordingly, Netflix inside this market has some strategic pricing, as they are able to determine the price to establish for...
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...the ways in which they compete. Our group discussed four basic market structures. The first market structure is perfect competition. Perfect competition occurs when numerous small firms are in competition with each other. Businesses in a competitive industry produce the socially optimal output level at the absolute minimal possible cost per unit. Another type of market structure is known as a monopoly. A monopoly is a business that basically has no competitors in its industry. They reduce output to drive up prices and increase profit. In doing so, they produce less than the socially optimal output level and produces at higher cost than competitive businesses. One example of a monopoly would be the existence of only one option in utilities in any particular region. The third type of market structure is known as an oligopoly. This is a type of industry that has very few firms, and if they collude they can reduce output and drive up profits much like a monopoly does. This doesn’t always work though because a lot of times businesses will not honor their agreement with their competing industries. This will make the firms end up competing against each other for consumers business. An example of this type of structure would be the airline industry. This type of situation often benefits consumers. The fourth type of market structure is a monopolistic competition. In this type of structure industries have slightly different products, but still compete against one another. One example...
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...Shantel Mackey Market Structure Simulation University Of Phoenix ECO/ 365 July 18, 2011 | |Perfect competition |Monopoly |Monopolistic Competition |Oligopoly | |An example of an organization| Investment Bank | Electric Company| Clothing Co. | Wireless Co. | |Goods or services produced by| Homogeneous |No close |Differentiate | Homogeneous/ | |the organization | |Substitutes | |Differentiate | |Barriers to entry | None | Extremely High | Somewhat Low | Somewhat High | |Numbers of organizations | Large Sums | One | Several | Few | |Price elasticity of demand | None |Absolute |Somewhat |Limited Owing to | | | | | |Competition | |Economic profits (Is there a | No | Yes | No | Yes | |presence of economic profits?| | | | | Abstract ...
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...ECO365 December 17, 2012 Blake Bennett Learning Team C Reflection: Market Structure 3.1 Compare various market structures and their characteristics. Perfect competition Monopoly Monopolistic competition Oligopoly Example organization Old Navy, Belk’s, Forever 21 Standard Oil Wal-Mart, Lowe’s, Sam’s Club Delta Airlines, United Airlines, OPEC Goods or services produced by the organization Identical to competitors No close substitutes, which allows for the monopoly to control the supply and market. Competitors create different products or goods. Can produce either differentiated or identical products Barriers to entry None Very High No barriers to enter or exit the marketplace High barriers of entry Number of organizations Many, to create competition One large one single firm Many, to create competition Few large firms that are interdependent Price elasticity of demand Price elastic Price inelastic Price more inelastic if the firm produces different goods from its competitor, and elastic if similar products are produced. The firm has less control over the price it can charge for output. Price is located somewhere between competitive and monopolistic pricing, but can vary depending on interdependence with among competitors. Is there a presence of economic profits? Short term yes, but long term no Possibility...
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...The strategy simulation game is to provide insightful information with different scenarios which help in understanding the differences in different market structures of monopoly, oligopoly, monopolistic competition, and perfect competition. The overall goal of the simulation games is to maximize Quasar’s profits and be competitive by making decision on strategies in dynamic market conditions. Simply, the total revenue minus the total costs is the method to calculate a firm’s profit. However, the company also has to consider how the sales price will affect the demand. The simulation game shows that when the price is set too high, the demand will be low, vice versa. When the company set the price within the average total cost curve and the demand curve, the company can expect profit and the company can expect the profit is maximized where marginal cost equal marginal revenue. In addition, the company’s strategic decision can also affect the result in total profit and overall sales. The key of the simulation is to find out how the company should react or modify its strategy when it enters different structures of market. In the monopoly market, even though the company offers unique product and dominant the market, the pricing decision can also affect the demand. The pricing scenario is to set the price at $2550.00 to receive the maximized profit of $1.29 billion where the marginal cost equals the marginal revenue. The first scenario is the company in s a process of deciding...
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...market share. The composition of competitive firms is known as the market structure. The grocery industry is an example of monopolistic competition. This type of market structure can have a positive and a negative impact on the structures competitive strategies. Monopolistic Competition Monopolistic competition occurs when there are many different firms competing for market share over similar products. There are generally low barriers to entry, which means it is easy for a small company to become a competitor in the market. All of the companies in this system sell similar products and must make a string effort towards product differentiation. Products and services are considered to have a high elasticity of demand; meaning a consumer has many comparable alternatives to choose from. If a firm decides to raise prices, a consumer in a monopolistic competition market should find it easy to find a similar alternative in their local area (Corcelli 2006). This differs from monopolies and oligopolies. A monopoly market is only one single seller. An oligopoly market is dominated by a small number of larger companies selling slightly different goods. Both a monopoly and oligopoly market structures only have a small number of competitors and still perform product differentiation, but they rarely compete on prices. It is also different form perfect competition, because it lacks a high level of efficiency though they share the characteristic that in the long-run equilibrium, organizations...
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...MARKET STRUCTURES MARKET STRUCTURE In economics, market structure (also known as market form) describes the state of a market with respect to competition. MAJOR MARKET FORMS The major market forms are: • • • • • Perfect competition, in which the market consists of a very large number of firms producing a homogeneous product. Monopolistic competition, also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share. Oligopoly, in which a market is dominated by a small number of firms which own more than 40% of the market share. Monopoly, where there is only one provider of a product or service. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. The correct sequence of the market stucture from most to least competitive is perfect competition, monopolistic competition, oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are: the number and size of producers and consumers in the market,...
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...Competition and Regulation Historical Background The “Industrial Revolution” brought more than just change to the agricultural environment of America, it brought change to the business environment as well. New industries such as railroads, petroleum, coal, and meatpacking began to be “monopolized” (either as pure monopolies or oligopolies), and achieving such dominance, these businesses began implementing questionable production, employment, and pricing tactics. Not surprisingly, these practices lead to a public revolt against monopolies, which resulted in government intervening on behalf of the complainants. Define Industrial Regulation Two solutions were implemented to deal with oligopolies and monopolies— antitrust laws prohibiting monopolies were passed and regulatory agencies were formed to evaluate and/or regulate corporate organizations. Both solutions seek to increase competition and protect the public from unscrupulous business practices. The Federal Trade Commission was formed through the Federal Trade Commission act of 1914 and gave government regulatory power over corporate mergers, and/or acquisitions, and the ability to investigate businesses for unfair approaches to competition or shady behavior. Essentially the desired impact of antitrust legislation and industrial regulation is to provide higher quality products and/or services at a better price to the consumer. Experience has shown that monopolies and oligopolies become abusive without governing...
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...AQA ECON3 JANUARY 2011 ESSAY 2 D Oligopolies are concentrated markets with a few firms sharing a large percentage of market supply, while a contestable market has low entry and exit barriers. Sunk costs (such as advertising or capital investments which cannot be recovered) and legal barriers creating statutory monopolies are examples of entry barriers which reduce contestability. I Oligopolistic markets may not operate efficiently if firms enjoy price-making powers. An This is especially likely if collusion occurs. Collusion offers firms the opportunity to limit the uncertainty generated by interdependence in oligopolistic markets. There is the potential for firms to operate as a joint monopoly, with the effect that output is squeezed and price is raised. As a result the price (which indicates the marginal benefit received by the last consumer) is raised above the marginal cost of production. This suggests that further units of the good could be produced and that these units would carry a net benefit to society. Collusive oligopoly is then seen as a source of inefficiency, creating a market failure and a deadweight welfare loss to society. This is illustrated in the diagram. An Diagram Collusive oligopoly may reduce efficiency I Making oligopolistic markets more contestable has the potential to improve the efficiency of the market. An This is because removing entry barriers allows the threat of potential new competition to act as a discipline on the conduct...
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