Pure Competition

568 Words2 Pages
bulb-icon

Recommended: Market Structures(economics)

There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries. No single firm can influence market price in a competitive industry; therefore a firm’s demand curve is perfectly elastic and price equals marginal revenue. Short-run profit maximization by a competitive firm can be analyzed by comparing total revenue and total cost or applying marginal analysis. A firm maximizes its short-run profit by producing that output at which total revenue exceeds total cost by the greatest amount. A complete firm maximizes profit or minimizes loss in the short run by producing that output at which price or marginal revenue equals marginal cost, provided price exceeds minimum average v...

Show More
Related

  • Australian Airline Oligopoly

    2191 Words  | 5 Pages

    Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.

    Read More

  • Environmental Analysis Of Lockheed Martin

    1642 Words  | 4 Pages

    This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.

    Read More

  • Calibrated Case Study

    711 Words  | 2 Pages

    Calculating the right price for a product can be difficult, mostly because it will affect Calibrated’s bottom line. Increasing the price of a product to maximize profit can induce several risks to a company. For example, making a change to the fixed or variable costs, the number of units sold will have an impact on the company’s profitability. Increasing the unit cost of a product and decreasing the number of units sold will have a negative impact on the

    Read More

  • Competition

    918 Words  | 2 Pages

    Two best friends are torn apart. A man meticulously plots revenge on the person who got the job he was dying for. A nation is full of rage and fear because another country beat them in the race to walk on the moon. Sadly, all of these situations were caused by one thing, competition. In Alfie Kohn’s essay, “Competition Is Destructive”, he describes competition as having a “toxic effect on our relationships”(11). Although competition has many positive effects in this world, when talking specifically about relationships, whether it be between best friends, two strangers, or even entire nations, it fuels negative feelings and attitudes that transform people into monsters.

    Read More

  • Pricing Strategies of the AUDI Automobile Company

    769 Words  | 2 Pages

    Intuitively, a cost-plus approach sets a lower boundary for the selling price. Yet to pitch a competitive price on the market, it takes more than that. The demand forecast advocates opting for the lowest selling price which yields the highest return. A market penetration strategy necessitates thorough knowledge of the selling prices of the nearest competitors and their retaliation potential. Ideally, the lowest price in the market of £10,400 dictates the upper ceiling of AUDI’s price discretion. However, setting initially a too low price in the hope for increasing it subsequently is not a viable option, as prices are somewhat inflexible upward. Instead, costs have to sink in the long run. Nevertheless, claiming a larger market share will allow AUDI to deftly climb the steep learning curve, lower its costs and further mobilize against market followers. A high price elasticity of demand insinuates that profit margins will continue to soar, if selling prices are reduced any further. As the point of maximum profit is apparently not yet reached, the company is advised to extend the range of the forecast. But is the highest profit naturally the best profit?

    Read More

  • David Colander Chapter Summary

    1561 Words  | 4 Pages

    In chapter 16 David Colander writes about what firms, markets and competition actually focus on in the real world. Colander begins by noting that it is reasonable to start with assumption that profits are profit maximizers, however, in the real market it depends. Colander notes that if firms are profit maximizers they are much more concerned with long-run profits rather than short run profits. Thus, even if they can, they make not take full position of their monopolistic situation in order to strengthen their long-term position. An example the author provides is the liberal return policies that companies have.

    Read More

  • Perfect Competition And Real Estate Agencies

    1355 Words  | 3 Pages

    A perfectly competitive market is based on a model of perfect competition. For a market to fall under this model it must have a number of firms, homogeneous products, and easy exit and entry levels into the market (McTaggart, 1992).

    Read More

  • Difference Between Oligopoly and Monopolistic Competition

    378 Words  | 1 Pages

    Difference Between Oligopoly and Monopolistic Competition An oligopoly market structure is one in which there are a few large producers who are present in the industry and account for most of the output in the industry, there are many small firms but few large. firms dominate and have concentrated market share. Whereas monopolistic competition is a market structure that has a large number of sellers, each of which is relatively small and posse a very small market share. Another feature of an oligopoly is that there are some barriers to entry and exit into the industry.

    Read More

  • The Effects of Advertising on Profits

    1120 Words  | 3 Pages

    The. An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share. In a Monopoly, there is one firm that controls the market, and there are no similar products being sold by other companies. Advertising is therefore used to encourage people to buy more of their product. In a monopoly there is a downward sloping demand curve, the reason for this is that a firm must lower the price to sell an extra unit of their product.

    Read More

  • Compare And Contrast The Four Market Structures

    1100 Words  | 3 Pages

    The second market structure is a monopolistic competition. The conditions of this market are similar as for perfect competition except the product is not homogenous it is differentiated; thus having control over its price. (Nellis and Parker, 1997). There are many firms and freedom of entry into the industry, firms are price makers and are faced with a downward sloping demand curve as well as profit maximizers. Examples include; restaurant businesses, hotels and pubs, specialist retailing (builders) and consumer services (Sloman, 2013).

    Read More

  • Greed

    1341 Words  | 3 Pages

    The Microsoft Encarta dictionary defines greed as "an overwhelming desire to have more of something such as money than is actually needed." This definition cannot be argued with for it is plain and simple, giving the essence of the word. But to millions, perhaps billions of people, greed is something else. Some people portray greed as being qualities of the evil, selfish, and corrupt. Although these viewpoints may be partially true, greed cannot be condemned as solely being an escapee of Pandora's Box. Let us agree that greed is pursuing actions guided by rational self-interest. This means that anything outside food and water acquired at the cost of anyone else, no matter little they are affected can be defined as greed. Greed is a driving force of the world's wellbeing; all attempts to eliminate greed from humanity have ended up as disasters. Nearly all inventions of today and days past are the offspring of greedy people. Most jobs and societies are created because of greed since it is a motivator and pushes people to try and do their best. It is greed that encourages the consumer to purchase the best product at the cheapest price, thus creating market forces that help in eliminating inefficiency and waste. Greed is an asset to humanity, a tool that some are able to embrace and prosper by better than others.

    Read More

  • Perfect Competition Essay

    735 Words  | 2 Pages

    In the short-run, the optimal condition (MR = MC) does not always guarantee that the firm make a profit. Here is

    Read More

  • Market Analysis: Four Different Types Of Market Structure

    1080 Words  | 3 Pages

    A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...

    Read More

  • The Structure Of The Market Structure Of Oligopoly And The Difficulty In Predicting Output And Profits

    1648 Words  | 4 Pages

    Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industry's output can affect competitors. Examples of oligopolistic structures are supermarket, banking industry and pharmaceutical industry.

    Read More

  • Monopoly Essay

    926 Words  | 2 Pages

    Analysis of profit oligopoly identical as monopoly profits: in the short term it can get positive, zer...

    Read More

More about Pure Competition

Open Document