...Maximizing Profits in Market Structures. By Damon DeVries. First lets start with A perfectly competitive market. This simply is a market in which economic forces operate unimpeded. There are certain things a market must meet to be competitive the first being that both sellers and buyers are price takers, the second condition is there has to be a large number of firms, there must be no barriers to entry ,all the products from the firm’s must be identical and finaly there has to be complete information. A monopolistic competitive market is a market structure were firms sell products that are similar but not identical to one another. A couple characteristics of this market structure are a large number of sellers which means the firms compete. There is product differentiation . there has to also be free entry. We can now look at monopoly this would be a firm who is the only producer and seller of a product and there would be no close substitutes. A example of this would be say Microsoft with Windows or Apple with the MAC. Now we can look at the oligopoly is basically a market in which there are only a few sellers , each whom offer similar or sometimes identical to other firms. A few characteristics of a oligopoly are to start interdependent firms so this could be like companies who buy product from one another in order to produce their own goods. Again there are fewer sellers offering similar products....
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...I argue that a business has a responsibility to maximize its profits and that for a business to maximize profits for its shareholders it must at least adopt a pseudo-stakeholder theory of operation representing social responsibility although it has no moral responsibility to be socially responsible. To facilitate this argument, I will use the definitions of those terms as presented by the authors in the book. The stockholders invested their money for the purpose of earning a return on that investment in the form of more money, not in the form of social and moral gratitude from every stakeholder involved with the corporation. Management must take that intention and do their best to see that it is realized. To do so they have to be concerned with the opinions and feelings of all of the stakeholders associated with their companies. If a management team operates a corporation in a way that they show the stakeholders that they are only concerned with the bottom line, then those same stakeholders, and more specifically the consumers, will react to that in negative ways. Theyll look for substitutes to the corporations products or determine that they can live without the products and thereby lower the corporations revenues. If the corporation is not run environmentally efficiently then the towns and cities that are home to the corporations factories and offices will no longer welcome them and may take measures to force the corporation out of their towns. If the corporation habitually...
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...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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...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 market in the economy has the same goal which is to maximize their profits. This is shown by subtracting the total revenue from the total cost of doing business. When a firm in a competitive market tries to maximize its profits the firm looks at how many units of a good can be produced...
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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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...When we operate a business, maximizing company’s wealth is more suitable than maximizing its profit as a goal of the business, it is because maximizing profits relates to profits only, and it assumes away the problems such as uncertainty of returns and the timing of returns, while maximization of the market value of the owners’ equity has take into all the considerations of all the financial decisions, such as wealth for the long term; risk or uncertainty; the timing of returns; and the stockholders’ return. Maximization of profits is regarded as the most commonly cited goal, always concern with the operational plans, but it is not a suitable objective at all, because there are many alternatives inside this outlined goal, For example, does that mean a short term or long term maximization target? Or what kind of profit is the target focuses on? It is not a fully appropriate objective, partly because it does not specify the timing or duration of expected returns. Is the investment project that will produce $100,000 return 5 years from now more valuable than the project that will produce annual returns of $15,000 in each of the next 5 years? An answer to this question depends upon the time value of money to the firm and to investors at their interest. Another shortcoming of aiming at maximizing profit is that it does not consider the risk or uncertainty in the process of making profits. Some investment projects are more risky but the profit cannot reflect this situation. As...
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...Market Structures and Maximizing Profits /XECO/212 Principals of Economic In this paper I will discuss competitive markets, monopolies, and oligopolies and what role each of these plays in an economy? I will also point out: o What the characteristics of each market structure is? o How the price is determined in each market structure in terms of maximizing profits? o How output is determined in each market structure in terms of maximizing profits? o What are the barriers to entry, if any? o What role does each market structure play in the economy? First I would like to discuss what a competitive market is. This market has a large number of buyers and sellers, such that no single buyer or seller is able to influence the price or control any other aspect of the market. That is, none of the participants have significant market control. A competitive market achieves efficiency in the allocation of scarce resources if no other market failures are present (AmosWeb). Usually the competitive market does very well because demand price and supply are price equal. The demand and supply prices cannot generate any greater satisfaction by producing more of one good and less of another (AmosWeb). People want good products and they want what they pay for. I would be willing to spend hundreds on hair supplies as long as the products are good. If a product does not really provide the satisfaction you are looking for then you want to pay little or nothing for it right...
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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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...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 a metropolitan area. There are relatively few barriers to entry/exit...
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...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...
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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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...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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...Las Vegas International Academic Conference Las Vegas, Nevada USA 2012 Making Price Elasticity A Useful Metric For Maximizing Profit Ted Mitchell, University of Nevada, Reno, USA Igor Makienko, University of Nevada, Reno, USA Shawn Mitchell, BA, MA, President of Chessboard Communications, Sparks, NV, USA Abstract An estimate of a product’s price elasticity can be used to calculate whether a price change will increase or decrease sales revenue. However, the price elasticity of demand does not indicate if a price change will increase or decrease gross profit because the marginal cost per unit confounds the calculation. However, an estimate of the price elasticity can be combined with the product’s markup to calculate if a change in the selling price will increase or decrease the profit. The purpose of this paper is to demonstrate how estimates of the price elasticity and the markup can be combined to help managers decide if greater profits can be realized with a price decrease or a price increase. Introduction A few minutes searching on the Internet will demonstrate that the concept of price elasticity is very much alive and kicking. There are hundreds of sites that offer definitions of and provide explanations about the price elasticity of demand. The vast majority of sites indicate that elasticity is a useful metric for people who manage everything from the individual business firm to the entire economy. Some of the information is accurate and some is inaccurate. For...
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