Maximizing Profits in Market Structures
Market structures are not as complex as they seem. At times the thought of how markets work can seem confusing because the prices change and balance themselves on their own when multiple firms are buying and selling similar goods. These are what the business world calls competitive markets or sometimes a perfectly competitive market. With all of the different firms producing similar goods you would think that some firms would go out of business. These types of competitive markets have a negligible impact on the market. Think about how one seller can’t control all the markets prices or output, (unless their good happens to be exclusive in which case the market for that individual product would be more desirable in some ways). Each competitive marketer is so small compared to the other sellers (like selling gasoline for instance) one firm won’t be affected if another raises their prices. It is likely only that seller will reap the consequences of that action. Competitive markets occur when many buyers and sellers compete for the same market. The way that competitive markets maximize profits is producing the quantity at which marginal cost equals marginal revenue. This also determines the quantity that competitive markets output. The firms don’t want to create so many products that it is not being bought. If the revenue is more than the cost to produce then the firm would increase its output.
Monopoly is more than just a popular board game by Hasbro; a monopoly (very much like the board game) is when one individual seller controls most or all of one particular good. Not having any competition makes it easy to charge any price and supply goods when it’s convenient for the firm. Take Apple electronics into consideration. They are certainly not the only maker of tablets, phones, or mp3 players in the market today but they are the