...Differentiating Between Market Structures 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...
Words: 718 - Pages: 3
...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...
Words: 979 - Pages: 4
...Tanka Acharya Proff. Maxey ECON 294 Chapter 10- Page 263-264 Question # 2 * The demand curve faced by a purely monopolistic is downward sloping because A monopolist has a freedom to charge a whatever that want and they are single seller. With a change in the price, the quantity demanded also alters. Owner, himself/herself is a firm as well as industry. Being the entire industry, the monopolist’s supply is big enough to affect prices. By decreasing output, the monopolist can force the price up. Increasing output will drive it down. The demand curve faced by a purely competitive firm is horizontal, perfectly elastic. Price is given and fixed and the firm faces a multitude of competitors, all producing perfect substitutes. In these circumstances, the purely competitive firm may sell all that it wishes at the equilibrium price, but it can sell nothing for even so little as one cent higher. Monopoly power also depends upon elasticity of the demand curve. If the demand curve is less elastic the monopolist has a greater degree of control. As the demand curve becomes more flexible or flatter the monopolist’s control starts declining. Question # 6 * There are many factors involving in the price change in pure competitive and monopoly firms. The producer can face different price from both firms. Competitive firm have many competitors so that they cannot increase or decrease price as they want but in monopoly they can. The producer always interested to get higher...
Words: 905 - Pages: 4
...Course: - Edexcel HND in Business Module: - Business Environment Assignment Prepared by: Lecturer: Mr Term: Sepember-December2012 Course Start date: September2012 (Birmingham Central Campus) Introduction: This Assignment is about Business Environment and I have to complete the flowing tasks for the purpose of the assignment: Task 1 1. Types of Business Organisations, their purposes: There are three main types of Organisation in UK A) Private sector organisations. B) Public sector organisations. C) Voluntary sector organisations. The main types of Business organisation in the Private Sector is: The Sole trader: A sole trader is a business that is owned by one person. It may have one or more employees. It is the most common form of ownership in the UK. (e.g. Window cleaning, and Plumbing, etc.). Nowadays lots of people are setting up their own businesses by creating small web-based companies working from home. The Partnership: In a partnership, partners are personally liable for the debts of the business, although partners in a limited partnership (not to be confused with a limited liability partnership) who play no part in the management of the business, may have a limit on their liability set out in the Partnership Deed.. Companies: are owned by shareholders that each contributes a stock of money into a central pool. This pool of...
Words: 5576 - Pages: 23
...wireless market, providing the nation’s largest 4G LTE network and being the largest U.S. wireless company. Although Verizon leads in wireless service, the organization does compete with three other main wireless carriers; Sprint, T-Mobile, and AT&T. This competition helps us to better understand the market structure at which Verizon competes in, oligopoly. Oligopoly is a market form in which a market or industry is dominated by a small number of carriers. Other characteristics that make us aware that Verizon operates in an oligopoly market structure are; high barriers, interdependence, and non-price competition. There are high barriers in the wireless industry making it difficult for entry for new businesses, this allows only a few carriers to dominate the market. Interdependence is extremely present within an oligopoly market structure, in the wireless market each carrier makes decisions based on other carriers and their response. An example of interdependence among wireless carriers could be Verizon offering a lower price which causes the other carriers to respond. Non-price competition also exists in the wireless oligopoly market, because they are basically all providing the same service, carriers can use different devices, plans...
Words: 454 - Pages: 2
...firm in the market”. (Thomas, Maurice 2010, p. 561). An oligopoly is described in the book as a “few relatively large firms, each with a substantial share of the market and all recognize their interdependence.” (Thomas, Maurice 2010, p. 512). Meaning, direct competitors understand their internal decisions will affect not only their profits and placement in the market, but also greatly their competitors. Price cutting or expensive advertisement plans will affect the firm’s profit margins, but also with strategically place the competing firm in a position to react. Even in small towns or multiple businesses in the same industries from restaurants to retail, need to be aware of how their decisions affect their own business, but also their market. Decisions should be systematically made and will economically affect a business along with the anticipation of competitor’s reaction to their precise move. Oligopolies are everywhere and can be detected from wheat that is managed by large agriculture groups to cell phone companies. Oligopolies How do firms in the industry compete? Managers within interdependent industries make decisions that will affect not only their firm, but they must consider the reaction to their competitor as well. Without this consideration, the rival’s reaction will certainly affect his or her own sales and profitability due to that decision, which may or may not be intended. An oligopoly can be formed when a selected few companies dominate a market...
Words: 2989 - Pages: 12
...Influence of Math on Economics Michelle Balmer, Marcie Holland, Beverly Segars, Israel Figueroa, and Porshia Cross MTH 110 Rigoberto Martinez March 17, 2012 The Influence of Math on Economics The history of mathematics is an investigative study of the discoveries of mathematics methods and notations from the past. The study of mathematics began in the 6th century BC with the Pythagoreans who coined the ancient Greek term mathematics with the meaning subject of instruction. Before the spread of knowledge, mathematics was written expressions of the development of Babylonian, Egyptian, and Pythagorean Theorem, which demonstrate the basics of arithmetic and geometry. Arithmetic is one of the oldest forms of mathematics used by Antoine-Augustin Cournot and Joseph Louis Francois Bertrand for tasks of simple day-to-day counting to science and business activities. Arithmetic involves the study of quantity as it relates to addition, subtraction, multiplication, and division. Mathematicians refer to the more advanced term of number theory. Antoine-Augustin Cournot and Joseph Louis Francois Bertrand’s influence on mathematics lay the foundation of the economic effect of the application method on economic theory and analysis of how it will affect others. Each allows individuals to form a meaningful understanding of the complex expressions in various languages. Cournot and Bertrand have used the importance...
Words: 1942 - Pages: 8
...Game theory is the method utilized to understand the behavior of oligopolies or market situations in which each of a few producers affects but does not control the market. Unlike monopolies in which a company has complete control of the entire supply of goods and/or services in a certain market, oligopolies do have competitors with in the market. However, unlike monopolistically competitive firms and perfectly competitive firms, firms within a oligopolistic frame work have so few competitors that marketing and pricing decisions made by one firm has a very unique possibility of affecting all the other firms within that market segment. In essence, competitors must take their competitors' possible reactions and responses into account when making decisions. The table below shows the Coke and Pepsi Payoff Matrix with respect to price competition. Both companies have two fundamental strategies: charge an elevated or above market price or a minimal or below market price for its products. Both companies have the possibility of obtaining a big payoff by charging a minimal price while its competitor charges an elevated price, but both companies know that if one of them cuts it price the other will quickly follow suit, resulting in a smaller payoff for both. The resulting equilibrium is both companies charging a high price and engaging instead in non-price competition. Coke vs. Pepsi Payoff Matrix Pepsi charges high price Pepsi charges low price Coke charges high price Coke...
Words: 402 - Pages: 2
...Industry A Concentration ratios are used to measure the extent of competition in an industry by looking at the total output produced by the largest firms. Although there are several measures in the literature, generally the biggest four and biggest eight firms are considered (Cabral, 2000). A low concentration ratio is regarded as an industry with more competition and firms have very low control. The low concentration can be from 0 to 50 per cent and the industry can have a structure ranging from perfect competition to oligopoly. Since in industry A there are 20 firms and the CR is 20 per cent, it can be deemed as a low ratio. Therefore, the industry is a perfectly competitive one with a lot of firms competing with each other, and no one firm controls a big chunk of the market. A perfectly competitive industry has many buyers and many sellers, also the products are quite standard and resemble to each other (Microeconomics: The Basics). The number of sellers makes it impossible for any single firm to control the market and the price is determined by the demand and supply conditions. Since the products are very similar or identical to each other, the buyers can switch from one good or service to another when there are price differentials. Additionally, the barriers to entry and exit are quite low; hence firms can easily enter and leave the industry. As a result of all these features, the economic profits are zero and maximum efficiency is achieved. Nevertheless, the pure perfect...
Words: 967 - Pages: 4
...Forms of Industrial Organization Economists group industries into four distinct market structures: monopoly, oligopoly, monopolistic competition, and competitive market. These four market models differ in several respects: the number of firms in the industry, whether those firms produce a standardized product or try to differentiate their products from those of other firms, and how easy or how difficult it is for firms to enter the industry (McConnell & Brue, 2004). This paper further defines each market structure and provides an example of a company representing each market structure. Monopoly A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it, and what pricing can be charged for it. A great example of a monopoly was the company Standard Oil, which existed roughly from 1895 to 1911. Standard Oil grew by acquiring its competitors and forming secret agreements with railroad transport to allow them to undercut competitors. Because Standard Oil was able to sell its product cheaper than its competitors, consumers continued to purchase Standard Oil product, forcing the other companies to either go out of business or sell out to Standard Oil while there was still some value in the company. Marketshare soared and Standard Oil gained the ability to set what pricing it wanted on its product because other competitors...
Words: 1443 - Pages: 6
...Forms of Industrial Organization Forms of Industrial Organization In today’s business world companies operate within different market structures, which include pure competition, monopoly, monopolistic competition, and oligopoly. These market structures are characteristic descriptors that reflect the strength of buyers and sellers within the market. This writing will examine each of these market structures and identify a company which operates within the market structure. This writing also examines Quasar Computers, a fictitious company in which the authors participated in a software simulation. Throughout the simulation the Quasar evolved through the four market structures. This writing will identify the findings of that evolution through the life cycle of their products and the changes of buyers and sellers over time. Pure Competition In pure competition, a large number of independent sellers of standardized products characterize the market. Information is free flowing and free entry and exit exist. The seller is the price taker and not the price maker (McConnell & Brue). The firm in perfect competition is a structure that demonstrates the market under degrees of completion, given certain conditions. Pure competition is an unlikely scenario and is rare in the real-world; moreover, this market model is significantly important. One can learn from this model, from various markets, such as form agricultural, fish products, from foreign trade, and metals...
Words: 1789 - Pages: 8
...Market Structure and Maximizing Profits There are four structures that exist within a market. These four are perfect competition, monopolistic competition, monopoly, and oligopoly. I will explain each market structure, and define what they are. I will also discuss how each structure works, and how each form maximizes the companies’ profits. I will also explain how to find the maximum possible price for an object before the company will start to lose money. If the company is not making a profit the company may go bankrupt. The company must pay attention to its market structure along with its own profit margins. The following are some characteristics of a company’s market structure. “These characteristics are: (a) number of firms in the market, (b) control over the price of the relevant product, (c) type of the product sold in the market, (d) barriers to new firms entering the market, and (e) existence of non-price competition in the market” (Sahu, pg.1, 2010) By determining how many companies are in a specific market you can determine the amount of competition there is producing the same product. What the product is will determine if the item is being supplied in a competitive market structure or a monopoly. This will also determine the amount of profits made by the company on the item. There are a few barriers that can hinder a company from entering a market. These barriers are product availability, ownership, patents, and if the company owns the items original location...
Words: 1168 - Pages: 5
...theories that make up the market structure, they are perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these market structures is related to an increase or decrease in the price of a product and the purchaser’s response to the change. Throughout this paper, I will briefly describe each of the market structures listed and some its characteristics. Perfect competition also known as pure competition marginal cost equals marginal revenue. The industry is big and is made up of several small firms. Firms that participate in perfect competition is considered to be a price taker, neither the consumer or seller can cause an influence in the price of the product. In a perfect competition market structure there aren’t any barriers to enter or exit, so it is easier for firms to enter and exit the industry whenever they choose to. Secondly, there is the monopolistic competition. In monopolistic competition firms compete by selling differentiated products. Unlike perfect competition, firms in the monopolistic competition has a little control over the pricing of their products. Monopolistic competition is a non-price competition, the competition is based upon the differentiated products that each firm sells. There are few barriers to enter and exit the industry, so firms can enter the industry with a low startup cost. Next, there is oligopoly. “Oligopoly is a situation in which several firms compete over a given market, but there are so few firms that...
Words: 1572 - Pages: 7
...| The Wireless Telecommunications Industry in Canada | | An analysis of the Canadian wireless telecommunications market reveals that many consumers are unhappy with high prices and want to see a more competitive marketplace, while the government agrees; some experts believe three competitors is the natural number for the industry. The wireless telecommunications market in Canada consists of an oligopoly comprised of three major players; Rogers, Bell, and Telus. These three companies combined have over a 90% market share in the industry (Mayer, 2013). Many consumers are unhappy with their mobile phone bills but are stuck paying high prices because there aren’t any cheaper alternatives. Interestingly enough, many other countries’ wireless telecommunications markets have a similar make-up to Canada’s, where three or four companies dominate the market. However, according to one report by Wall Communications Inc, consumers in many of those markets are subject to more affordable mobile phone bills (Wall Communications Inc, 2013). The Canadian government has sided with consumers on this issue over the past several years and have attempted to increase the number of players in the market by altering old policies and implementing new ones. They believe if they can increase the number of mobile carriers throughout Canada from three to four, consumers will benefit from increased competition, more options, and lower prices. However, it appears they are struggling to...
Words: 2044 - Pages: 9
...Perfect competition is “a market structure where competition is at its greatest possible level” (The Economic Times, 2016). In this market, entry and exit is very easy and also free as there are many firms, both sellers and buyers who all produce homogenous items. Firms are price takers because they cannot control the price of their products, as they are determined by the interaction of demand and supply in the entire market. Another characteristic in this market is that the producers and the consumers have total awareness of products including prices as well as the costs of the market, quantity and availability (Sloman, Hinde and Garratt, 2013), hence the mobility of the factors of production is perfect in the long run in this market. Being price takers, to achieve the aim of profit maximisation, firms produce a level of output where price equals marginal cost (MC) of producing an extra unit of product. Profit is maximised where marginal revenue (MR) is equal to MC because price is also the MR for competitive firms. Monopoly is the opposite of perfect competition due to a single firm owns and serves the entire market because there is no competition available. There is “only one provider of a good or service, great barriers to entry for seller, no barriers to entry for buyer” (Econ Guru, 2006). This often then leads to high prices and mediocre products being sold, however very unique. Monopolies are price makers because they control the market and their prices are set higher...
Words: 1099 - Pages: 5
