...Maximizing Profits in Market Structures XECO/212 Principles of Economics Maximizing Profits in Market Structures There are several types of market structures that influence the goods consumers buy and at what price is set for each good. There are three main market structures which are the competitive markets, monopolies, and oligopolies. Each of which has unique characteristics that determine what role each will play in an economy. The different ways price and output effect maximizing profits in each market structure, along with any entry barriers that may exist for each market structure is also a topic to be discussed. The unique characteristic each market structure has makes them stand apart from one another. First let’s examine a competitive market to see what characteristics make this market unique from the other two being discussed. (A market is said to be competitive when it meets the two following characteristics: there are many buyers and many sellers in the market, and the goods offered by the various sellers are largely the same (Mankiw, (2007)). The buyers and the sellers in a competitive market are price takers because of their individual impact on the price of a good in such a large market. In other words, an individual buyer or seller does not make up enough of the market to even affect the market price of a good such as milk or gasoline. For example, leaving each accepting price generated by the market around them. Since we know what a competitive...
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...types of market structures that influence the goods consumers buy and at what price is set for each good. There are three main market structures which are the competitive markets, monopolies, and oligopolies. Each of which has unique characteristics that determine what role each will play in an economy. The different ways price and output effect maximizing profits in each market structure, along with any entry barriers that may exist for each market structure is also a topic to be discussed. The unique characteristic each market structure has makes them stand apart from one another. First let’s examine a competitive market to see what characteristics make this market unique from the other two being discussed. (A market is said to be competitive when it meets the two following characteristics: there are many buyers and many sellers in the market, and the goods offered by the various sellers are largely the same (Mankiw, (2007)). The buyers and the sellers in a competitive market are price takers because of their individual impact on the price of a good in such a large market. In other words, an individual buyer or seller does not make up enough of the market to even affect the market price of a good such as milk or gasoline. For example, leaving each accepting price generated by the market around them. Since we know what a competitive market consist of it is important to understand what role determining price and output play in maximizing profits for such a market. Every...
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...Maximizing Profits in Market Structures Course: XECO/212 Date: August 12, 2012 Maximizing Profits in Market Structures One cannot go into business these days without running into competition. It is the American way to improve on an existing business and market the business as the best, or believe the idea for a new business is so unique, competition is little if any. A competitive market has two characteristics, the goods offered are all basically the same, and there are a lot of buyers and sellers. “Each firm is so small to the market that it cannot influence the price of its product, and ends up taking the price as given by the market.’ Therefore the goal of any competitive firm is to find a good strategy for profit maximization, which is usually producing as much product as they believe will bring them more profit. A perfect example of a competitive business is the Dollar Store, or Dollar General, there are so many of them offering the same merchandise that the prices for things that cost more than the one dollar, generally have the same price from store to store.’ Buyers and sellers in competitive markets must accept the price the market determines, and are considered price takers’ (Mankiw, N. G. (2007), which is a barrier to being able to generate more profit. However there is a third condition in characterizing competitive markets and that is they are able enter and exit the market freely. Competitive markets do not fall into the categories...
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...Maximizing Profits in Market Structures XECO212 October 9, 2011 Dale Schwieterman Maximizing Profits in Market Structures Competitive Market A competitive market is a market with many buyers and sellers trading identical products so each buyer and seller is a price taker (Mankiw, 2007). There are two characteristics o f a competitive market: (1) There are many buyers and sellers in the market, (2) the goods offered by the various sellers are largely the same. In addition to the previous two characteristics, there is a third condition that is sometimes thought to characterize competitive markets; firms can freely enter or exit the market. For example if someone decides to start an egg farm, and another existing egg farm decided to leave the market, this condition would be satisfied. Any firm in a competitive market, just like any other firm in the economy, tries to maximize profit (which equals total revenue minus total cost). Because marginal revenue for a competitive firm chooses quantity so that price equals marginal cost (Mankiw, 2007). In short, the firm’s marginal-cost curve is a supply curve. When a firm cannot recover its fixed cost, the firm will choose to shut down temporarily if the price of the good is less than the average variable cost. However, in the long run when the firm is able to recover both fixed and variable costs it will choose to exit if the price is less than average total cost. In a competitive market the free entry and exit...
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...Maximizing Profits In Market Structures Reminder to always reword and put into your own voice before you submit any written assignment. Consider this a resource to use as you put together your final thoughts on your paper that you are submitting tomorrow. (My standard disclaimer on any written paper). All the best. Introduction Product and services are produced basically for final consumers and it must reach them in order to satisfy their wants. Process of exchange is necessary to take manufactured products and manufacturers to sellers. Market is a place where buyers as well sellers come together to for the purpose of transactions. Industry and firms have responsibility to formulate different strategies for determination of price and output under various market structures. On the basis of competitions among various firms in the industry, markets are broadly divided into: Perfect Competition Perfect competition is kind a of market where there are large number of buyers and sellers of the product. The products are homogeneous in nature so there is no differentiation strategy. Both the buyers and sellers have full knowledge of market conditions, as well as there is free exit and entry of the firms. Further, price tends to be uniform all over the market. In this type of market conditions, competitive firms may earn abnormal profits and suffer loss in the short-run. On the other hand, the companies have to be contended with normal profits only...
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...According to business definition, market structures are described as the makeup of a particular market. Market structure can be described with reference to different characteristics of a market, including its size and value, the number of providers and their market share, consumer and business purchasing behavior, and growth forecasts. The description may also include a demographic and regional breakdown of providers and customers and an analysis of pricing structures, likely technological impacts, and domestic and overseas sales (BNET 2003). The four elements to be discussed in this assignment are competitive markets, monopoly, oligopoly, and monopolistic competition. Each of these market structures produce differing results based on specific characteristics. Since the goal of all business is to maximize profits, it is up to each individual business to determine which market structure makes sense. A competitive market, also known termed perfectly competitive market, has two distinct characteristics. There are numerous buyers and sellers in the current market and the goods that are offered by the sellers are very similar in value and product. A competitive market is a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. In this market environment, no one participant holds any market power or influences the price of the product it buys or sells. An example of this type of market structure could be street food vendors in...
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...Maximizing Profits in Market Structures Paper Some people understand, but few people realize just how important market structure is to the economy. In addition, some people do not realize how market structure influences the price they pay for a good or service, which in turn determines the market price. Furthermore, three market structures (competitive market, monopolies, and oligopolies) influences the market price and the economy. However, on the surface, competitive market, monopolies, and oligopolies market structures may appear different; they all share a common goal. That goal is to maximize profits. The first of the three market structures I will discuss is the competitive market structure. Mankiw (2007) defines a competitive market structure as “a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker (Mankiw, 2007).” Therefore, in a competitive market, the buyers and sellers do not set the price for a product brought or sold, but the product’s market price determines the price of a product brought or sold. Since there are many buyers and sellers in a competitive market, with many of the firms selling the same or similar products, the firms do not have room to play around with the price of their products, because their competition would then take away their customer by pricing the same or similar product for a cheaper price. According to Mankiw (2007), three characteristics make up the workings of a competitive...
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...Week 3: Forum Question 1 Why do some workers make more money than others? Must everyone make the same wage? Explain your answers using labor market equilibrium. Your answer should be 200 to 300 words. Some workers make more money than others for various reasons, such as the type of work being preformed, the required skill-set for the work, training, experience, quality of work, etc. A workers wages are only justifiable if the value of the work they are required to do equals the wage. No one would argue that a cook at a fast-food restaurant should have the same wages as a neurosurgeon; the two jobs are entirely different and require completely different skill sets, education, training, and knowledge. Therefore, not everyone should make the same wage, even workers in the same position should not be paid the same wage, and the workers wage should be determinate upon their productivity, knowledge, and experience. The labor market is only in equilibrium when each company has purchased enough labor that is profitable at the equilibrium wage. The equilibrium wage is the wage rate that produces neither an excess supply of workers nor an excess demand for workers and labor market. A firm must determine how many workers are needed to keep the employment cost justifiable to ensure profitability of the company. Firms cannot allow wages to become a burden on the company; consequently, if the demand for the good or service that the worker is producing decreases the equilibrium is...
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...Market Structure is defined by the number of firms who are competing in that market, the factors that differentiate the firms from each other, the similarities between the firms, and any obstacles that would exist to any firm that wanted to enter the market. The level of competition exerts significant influence over the type of market structure that emerges and leads to what payoffs, if any, would result from entering that market. This paper will go into detail on the many distinctions between the different market structures, the obstacles to entering these markets, and how each type of structure maximizes profits. Markets are broken down into a few various categories. These categories are perfect competition, monopolies, monopolistic competition and oligopolies. An economist, citing economic theory, may express a preference to one type of structure based on the outcomes they can yield. The structure of each structure type is based on the traits of its business types. The attributes a business will display changes with the number of companies in that particular market. Management of prices, product types and entry barriers for new companies and market competition that do not depend on price are the attributes of a market. The capacity to control the prices of a company’s goods is price management. This is a critical element in market structure. Any company that can enjoy the benefits of a monopoly structure has ultimate price control for its goods. Those...
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...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 emphasize the importance of economics in decision-making. Market Structure ...
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...Market Structures & Amp Maximizing Pro XECO/212 Momoh Dudu 10/12/2011 What is a the number of companies rivaling in a certain market, how they differ and how they are similar, and the task they venture when entering and exiting the market determines that companies market structure. What roles does each market structure play in the economy. Many assumptions are made about the different types of markets, including competitive markets, monopolies, and oligopolies. This paper will break the wrong assumptions that there is competition in every market. It will also help to understand the following four questions. What the characteristics of each market structure consists of? How is price determined in each market structure in terms of maximizing profits? How is output determined in each market structure in terms of maximizing profits? What are the barriers to entry, if any? Competitive Markets also know as perfectly competitive market maintains two basic characteristics. The characteristics consists of having many buyers and sellers in the market and the goods and services brought forth but multiple consumers. These characteristics play a large part in devising the market price. These buyers and sellers take the market price as it is given to them. Competitive market has open doors allowing companies to enter and exit at will. Price determination is competitive markets in terms of maximizing profits are worked as total revenue minus total cost. Competition with buyers...
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...Market Structure & Maximizing 1 Assignment: Market Structure & Maximizing University of Phoenix Xeco/212 Principles of Economics Market Structure & Maximizing 2 Market structure can be characterized as the number of firms that are competing in a particular market; along with the ways in which the companies within these markets are alike or different and the barriers to entry that exist for these given market. The level of rivalry or competition also plays a powerful role in what kind of structure emerges in a given market. This paper will focus on competitive markets, monopolies, and oligopolies by detailing the distinctions between them such as how is price and output is determined to maximize profit, analyzing their barriers to entry: and what role each market structure plays in the economy. Price control is different in each market structure and is essential to know for maximizing profits. A company ability to control the price of its goods and services is called price management. Businesses that operate in a perfect competition market structure have no control over the price of their goods and services. Companies that have the ability to control the price of the products or services are companies that have the benefit of operating under a market structure called monopoly. Organizations that run under an oligopoly enjoy the same control over price as monopolistic competition or monopoly...
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...utsglobal.edu.in Rapid eLearning Train your employees with Rapid eLearning, cut your business costs www.niidtech.com MBA Distance Education Online 1 Yr MBA @ 29000. Approved from AIMA India & IAD UK. Enrol Now www.iibmindia.in Papermaking Technology Download white papers on new papermaking machines and processes www.risiinfo.com/whitepapers Decisions made by managers are crucial to the success or failure of a business. Roles played by business managers are becoming increasingly more challenging as complexity in the business world grows. Business decisions are increasingly dependent on constraints imposed from outside the economy in which a particular business is based—both in terms of production of goods as well as the markets for the goods produced. The impact of rapid technological change on innovation in products and processes, as well as in marketingand sales techniques, figures prominently among the factors contributing to the increasing complexity of the business...
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...Marketing Structures & Maximizing Profits XECO/212 Sunday, October 21, 2012 Market structures are the makeup of a particular market. Market structure can be described with reference to different characteristics of a market, including its size and strength, the number of buyers and sellers, form of competitions, extent of product differentiation, and ease of entry into and exit from the market. Markets are broken down into four various structures. These structures are perfect competition, monopolistic competition, monopolies, and oligopolies. The structure of each market is based on the traits of its business type. The attributes a business will display changes with the number of firms in that particular market. One of the four markets is a perfectly competitive market. This market is an opposite of a monopoly market, because it has many sellers, it has many buyers, and many products that are very similar. Similar products mean their competition is high, as there are many substitutes to choose from close by. Prices in a competitive market are determined by supply and demand, leaving the producers subject to price demands and very little influence; competitors in this market are also known as price takers. No participants are large enough to have the market power to set the price, but both consumers and producers can influence the price. There are very little barriers to entering the market. A perfectly competitive market plays an important role in the...
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...There are three market structures that individually play a role in the economy. The competitive market is a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. The monopoly is a market structure in which many firms sell products that are similar but not identical. The Oligopoly market is a market structure in which only a few sellers offer similar or identical products. Each of these markets has different characteristics, play different roles in the economy and have a different price determination. The competitive market, which is also known as the perfectly competitive market has two characteristics: (1) There are many buyers and sellers in the market and (2) the products offered are by many different sellers but the products are the same. There is also another condition, considered to be a characteristic: firms can freely enter or exit the competitive market. The result to these conditions; and the actions of any single buyer or seller in the market has a negligible impact on the market price. The buyers and sellers in the competitive market accept the market price as given. An individual consumer cannot change the price of the product nor influence the price or market structure of the product. Each seller has limited control over the price because there are many other sellers offering the same identical product. Sellers can sell as much as they want at the marketed price, but if the price was increased...
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