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Minimizing Profits Essay

1140 words - 5 pages

Maximizing Profits in Market StructuresThe attributes of the market structure consist of the number and relative strength of buyers and sellers and the measure of collusion among them, levels and forms of competition, extent of a product differentiating characteristic, and the ease of entering onto and exiting from the market. (1) Perfect competition Maximizing profits in the market means that a firm would have to determine the price and output level that returns the greatest profit. This paper will address the three of the basic types of market structure (competitive markets, monopolies and oligopolies) and the role they play in an economy.The number of firms that are offering goods or services in a specific market is the main foundation for market structure categories. This indicates the range of competition those firms have in that market. This is a strongly influencing factor on that market. Perfect competition and monopolistic competition structures contain many firms in one market. No one firm holds the majority of the market share. Oligopoly structure occurs when few firms are in the market. Monopoly exists when only one seller is present for a given product. Another factor in market structure is non-price competition. This is a product type base factor. The range of product differences is a determinant in this structure. Perfect competition, in this instance, would contain many firms that sell similar goods. There are few differences between the products or services that these firms offer. In a monopolistic competition structure, the goods or services will have some differences. In an oligopoly, the goods will have some differences that are more notable. Those in a monopoly will be, of course, all the same, since they are all produced by one firm.Another non-price competition factor is advertising. In a perfect competition, each firm will produce the same goods. In this setting, non-price differences do not exist. Advertising is used by monopolies, but it is not really required since there is no other supplier for those goods and services. Oligopoly structure firms use advertising a great deal.Entry barriers for new firms into a given market help determine a given market structure. Perfect and monopolistic competition allow for relatively easy entrance into the market. In these cases, investment to join is generally minimal. Barriers in these cases are considered to be low. In oligopoly, the entry barriers are quite high. This is due to the need for considerable investment to join that market. Barriers are not considered a factor in monopoly since any new firm in the market would change the structure automatically.In capitalistic economies, the primary market structure is always perfect competition. This structure will be used as a foundation for discussing the other types of market structures. Perfect competition exists when there are enough firms and sufficient demand to allow all firms to work at a productive level. This is considered...

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