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Maximizing Profits in Market Structures Lisa Flippen XECO/212 10/06/12
Basically they are all trying to get the best price. each firm produces identical products. there are restrictions on the entry and exit of the market.2 Competitive markets. This means that the competition cannot have any type of control over the market in which they are trying to sell. and firms have the opportunity to enter and exit the market freely. Monopolies are considered to be companies who are the sole sellers of a product without any substitutes. and potential producers are not privileged to the information regarding production . these market structures all have a part in our society. consisting of buyers and sellers who are price takers. or fuel. Competitive markets will have many buyers and sellers offering identical products. Oligopolies only have a few sellers that offer similar or identical products to the market. a single firm selling all output in a market. clothing. Companies can play different roles within the market structure being either monopolies. monopolies. or exclusive right given by government. This means that the actions of one seller in the market can impact the profits of the others. Whether it is pricing or production. The main characteristics of monopoly are. this could be in food. With these characteristics a competitive market can produce only when it benefits them and they can stop when they please. This one always bothers me because for example a cable company can basically charge whatever they want because they are the only company offering this service. There be companies that offer dish but only one cable and this just makes it hard for consumers to fight the cost. and oligopolies all play their own important role in our economy. It is important to know the meaning of these terms to actually know what they mean to the economy. These companies are interdependent in a way that the competitive companies are not. A competitive market can possess the following characteristics. Some of these can include ownership/control of a key resource. there is only one unique product without any close substitutions. public utilities. oligopolies or just being within the competitive market.
I have not seen any store that sells Microsoft at a low amount without the offer being directly from the company itself. These characteristics basically mean that the monopoly has total control of production and selling of a product causing those interested in the product to have to buy from the monopoly. and charge too much. If the monopolists uses some of the money they made to lobby in order to keep a monopoly. this would in turn become a welfare cost to society (basic. Forming a cartel and acting as a monopolist is how oligopolists maximize their total profits. product differentiation and perfect knowledge of the product. The price is determined in a competitive market by the number of companies that are competing in a particular market. Social costs can come from low output which can lead to dead weight loss. 2012). If the production levels decisions are made individually then they can result in . A monopoly maximizes its profits by first choosing the quantity at which marginal revenue equals marginal cost and afterwards it uses the demand curve to find the price that will drive customers to buy that quantity (Mankiw).3 techniques. Finally the characteristics of an oligopoly are profit maximized conditions. So they will normally produce less than a socially efficient level of output. There is also a characteristic call price rigidity meaning that if any company makes a price cut on their product it will immediately cause the other companies to drop their price causing a price war with the product. This is where the most profit is generated. Therefore no company will do a price cut without making a price output decision with the competing companies. In a monopoly each company will provide different product such as Microsoft the only company of its kind to product the type of software it possesses and no other company can duplicate it. To compare the total revenue to the total amount of output competitive market takes the price given by the market and tries to increase what is produced. if the price increases so will the quantity of the product. Simply putting it. the ability to set price.
patents. For example. and oligopolies all have their own role to play in the market structure. without these things the market would be a mess and it would make a lot of the abilities to purchase certain things very difficult. Economies of scale. There have even been lawsuits which has caused them to have to give its users a certain amount of credit on each bill because we were over charged. Before taking Economics I was not aware of anything other than what a monopoly is and now I . This helps save the consumer from being cheated out of their money and in some occasions paying too high of a price for a certain product or service offered. In a competitive market there aren’t any barriers to entry causing the entry and exit to be easy and without restrictions. The government can add additional sources by regulating and favoring existing companies making it hard for new companies to enter the market. This balance is also needed to control the actions of the major and minor companies and the products that they offer. A monopoly has extremely high barriers to entry meaning that other sellers are unable to enter the same market as the monopoly. Even though some of these things may not seem like a fair way to do business or even that the consumers are not being able to put in any input to help the outcome. The barriers to entry or high for oligopolists. whether it is realized or whether the knowledge is known competitive markets. In conclusion. This company can raise their prices but they still have to go through the government to make sure they are not having their customers pay too much for their services. there can only be one provider of electricity in our city because of this Dominion Power would be considered as a monopoly with high barriers.4 more products with a lesser price then they would under the monopoly outcome. and strategic actions by incumbent firms designed to discourage or destroy nascent firms are important barriers. access to expensive and complex technology. monopolies.
5 am fully aware of what roles the companies I buy from may play in the market structure and also what title they may fall under. .
http://www. (2007).basiceconomics.php . XECO212 website. Principles of economics.6 Resources University of Phoenix.info/monopoly-companies. Retrieved from University of Phoenix.