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Differentiating Between Market Structures Simulation Analysis

1445 words - 6 pages

Every single household in the entire world purchases goods and services on a daily basis. Whether individuals purchase food, gas, household items, household utilities, travel tickets or any other goods or services, many people deem it beneficial to know the markets that they take part in as the consumer. In order to begin understanding the importance of market structures this paper will first define the term and concepts concerning market structures. Next, this paper will analyze a simulation given by the University of Phoenix as a learning tool to help understand market structures and lightly covering what the advantages and limitations of supply and demand identified in the simulation were. Then this paper will attempt to apply the concept of market structures to an organization the author is familiar with. Lastly, this paper will make an effort to analyze how organizations in each market structure maximize profits.According to the BusinessDictionary.com website, the term market structure is defined as "interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market" (BusinessDictonary.com, 2008). The four basic market structures in economics are perfect competition, monopoly, monopolistic competition and oligopoly. A market that is in the market of perfect competition, "is a market in which economic forces operate unimpeded" (Colander, 2004). A market that is considered a monopoly is "a market structure in which one firmmakes up the entire market (Colander, 2004). A monopolistic competition is "a market structure in which there are many firms selling differentiated products" (Colander, 2004). Oligopoly is "a market structure in which there are only a few firms" (Colander, 2004). Having defined crucial terms concerning market structures, this paper will analyze the simulation provided by the University of Phoenix.The simulation positioned users of the software as a CEO of East-West Transportation a freight transportation company. The simulation took users through each division of the company, that if which being Consumer Goods, Coal, Chemical, and Forest Products. The simulation aided in the differentiation between the four market structures. It also taught students to identify and interpret cost and revenue curves for each market.The simulation's first circumstance was putting the user in the position to decide whether to continue with the Consumer Goods Division. The two senior staff members had opposing views on shutting down the division and continue by diminishing output. After going over the Average Variable Cost graph, Average Total Cost and Marginal Cist, the user must have lessened the output and maximize profit. According to the simulation since Profit = Marginal Revenue (P=MR), the reduction of output left it at Profit = Marginal Revenue =...

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