Maximizing Profits in Market Structures
- Submitted by: Gregory3972
- Views: 840
- Category: Other
- Date Submitted: 01/14/2012 07:28 AM
- Pages: 6
- Report this Essay
Maximizing Profits in Market Structures
Gregory Missman
XECO/212
December 4, 2011
Joyce Williams
Maximizing Profits in Market Structures
There are three main types of market structures: competitive markets, monopolies, and oligopolies. In each type, prices and supplies are determined differently. The economy is affected differently by each market structure. In the following paragraphs, the characteristics of each type will be explained and the rules for maximizing profits and supplies will also be laid out. It is important in business to understand the different types of market structures and how each conducts business.
The most common type of market structure is a competitive market. In a competitive market there are many buyers as well as many sellers. The goods that are sold in these markets are essentially the same such as the market for cheese. There are many companies that sell cheese and also many consumers that buy cheese. There are so many companies that sell cheese that no individual company in this market can set the price of cheese. They must therefore set their prices based on the market price of cheese. This means that these firms are price-takers and must take the price that the market sets. This market price is based on the equilibrium price calculated by the supply and demand of the product. A company in a competitive market can only maximize their profits by determining the maximum amount of a product that they can supply the market. If they supply too much or too little of a product, they can lose profits. Entry and exit in these markets is free but the more firms in the market the more spread out the market becomes. A market with too many firms means that each firm can only cover a small portion of the demand for the product. If more firms enter that portion becomes smaller. When firms exit the market that portion becomes greater. If too many firms were to exit a certain market, the market could become an oligopoly. Competitive market...
Gregory Missman
XECO/212
December 4, 2011
Joyce Williams
Maximizing Profits in Market Structures
There are three main types of market structures: competitive markets, monopolies, and oligopolies. In each type, prices and supplies are determined differently. The economy is affected differently by each market structure. In the following paragraphs, the characteristics of each type will be explained and the rules for maximizing profits and supplies will also be laid out. It is important in business to understand the different types of market structures and how each conducts business.
The most common type of market structure is a competitive market. In a competitive market there are many buyers as well as many sellers. The goods that are sold in these markets are essentially the same such as the market for cheese. There are many companies that sell cheese and also many consumers that buy cheese. There are so many companies that sell cheese that no individual company in this market can set the price of cheese. They must therefore set their prices based on the market price of cheese. This means that these firms are price-takers and must take the price that the market sets. This market price is based on the equilibrium price calculated by the supply and demand of the product. A company in a competitive market can only maximize their profits by determining the maximum amount of a product that they can supply the market. If they supply too much or too little of a product, they can lose profits. Entry and exit in these markets is free but the more firms in the market the more spread out the market becomes. A market with too many firms means that each firm can only cover a small portion of the demand for the product. If more firms enter that portion becomes smaller. When firms exit the market that portion becomes greater. If too many firms were to exit a certain market, the market could become an oligopoly. Competitive market...