Market structures Essay Example for Free

Market structures Essay This week was very informative and interesting for me, I have learned a lot from this week. This week has helped me in comparing various market structures and their characteristic, along with evaluating the effectiveness of competitive strategies within market structures. Furthermore, this week has helped me in determining profit-maximizing strategies based on market structure analysis. Some of the most interesting things learned were the examples of monopolistically, oligopoly and monopoly. Keeping the concepts of Monopoly, oligopoly and perfect competition straight has proven to be a real challenge. The amount of information presented is overwhelming at times. I had to step back and reread several sections repeatedly to ensure a clear understanding. The side-by-side comparisons of market structure was very helpful and presented in a manner that was clear and concise, promoting a better understanding of their differences. Monopolistically would be coffee shops there is a lot of different coffee shops in one area each coffee shops offers certain specialize different from the other shops. An oligopoly would be vet office with only a few in a certain locations. An example of monopoly market would be a telephone company that is assigned to a certain area. A monopoly is a company that rules a location but if priced to high from competitors can lose if monopoly. When firms consider profit-maximizing strategies it is important to look at the short-term and long-term processes of product output. When doing this, one needs examine the different types of competition. Any market types of competition will affect a company’s marginal revenue and marginal costs. A monopoly can control the market of certain goods or service, and a phone company is an example of this. Phone companies often are the only supplier, so they have no competition and set their prices as consumers will pay them. In a monopolistic comp etitive environment competitive strategies are constantly changing because of different goods and services hitting the market. Finally, an oligopoly environment an organization will bear in mind how its actions will affect its rivals. Many firm’s use the concepts to be successful. I was able to understand what a market economy is. I also was able to understand how a market works. A market works by an individual providing a service and in return that person would be compensated for that service. Also when someone wants a product in order to receive that product a payment is made in exchange for thus product. The chapter also goes on to discuss capitalism and socialism, I would define socialism as a society making the decision about what people want and need and how much of those products to produce, basically the society is making the decision. Capitalism I feel based on the definition stated in the text book, can be defined as when a small group of individuals have the main control over the controlling companys of products and service that are used on a daily basis. This allows them to set a price and the amount of the product or service that are available. The chapter also makes us aware of feudalism, which basically means you follow the footsteps of your predecessors, if your parents were farmers you will be a farmer, in essence following the traditions. The chapter also discusses Mercantilism, this in essence means that the government has the means and the rights to hire a non government controlled company in order to achieve the needs of the government. I did very well with the various market structures and their characteristics, but not so well with the other topics. A monopoly is the only player in their respective industry. An example of a monopoly is the local power company because you cant get power anywhere else, unless it is natural energy. An oligopoly is similar to a monopoly but there is more than one firm that dominates the market. An example of an oligopoly is the operating software for smart phones, which has two dominate players, Apple and Google. Monopolistic competition is where many companies sell basically the same product with minor differences. Perfect competition is when everyone sells the same thing, everyone has the same information, and it is easy to enter and exit into the market. I personally do not believe that an example of perfect competition exists; the closest industry may be agriculture. For firms to maximize their profits costs need to be kept low and revenues need to be boosted. Whichever route a company uses to maximize profits, it will affect both cost and revenue. For instance, if a company decides to advertise a new product, the advertising will affect cost and revenue. The price of the advertising will increase the costs of the product, but at the same time increase revenues because consumers are now aware of the product. The chapters on Monopoly Perfect Competition were as I had previously understood, and the conditions for each make sense. The development of evolving economic systems as discussed in Chapter 3 was like a history lesson review and the restatement of the three different types of businesses that exist (sole proprietorship, partnership, and corporation) a good reminder of what has been learned in prior classes. I gained some new understandings of Monopolistic Competition I had never heard the two used together before, but is a nice blend of the two market types. I didnt struggle with any of these things. What I did struggle with was the concepts, structures, and quite frankly the math surrounding Pricing and Profit Maximization in all the markets. I found it counter intuitive to my experience in business to not produce more, so as to create demand and keep pricing high, as is suggested in a Monopoly. The profit maximizing exercise was a challenge which boiled down to MR = MC is the profit maximizing rule for the monopolist. (Colander, 2010) This differs from the profit maximizing equation for Perfect Competition which is MC = MR = P but the TR and TCC graph for evaluating the best output level is perplexing and will likely take me the better part of 20 minutes to put one together myself I did enjoy this week’s team assignment. Was enjoyable writing about the new product option and th eorizing about the potential for said product. This week’s readings covered many different kinds of market structures. Starting with the basic Perfect Competition where the businesses sell the exact same product, to a monopoly that states that there is only one business that has complete control. From Monopolistic Competition which is where the businesses sell a similar product but not an identical product to the Oligopoly which is where there a few giants that control the industry. We went through all the different market structures, and there were many examples that were given to help explain the differences between the different market structures. One of the parts of the reading that I found very interesting, was on page 369, it discussed the idea of a sticky prices† This is where the idea is that if one company lowers its prices to try and gain business. The other businesses that are in competition will lower their prices too. This will prevent anyone from getting an edge on the competition. The gas prices are a perfect example of this. In Chapter 15, the cost of Welfare Cost Triangle, is discussed. The Welfare Cost Triangle is one of the many reasons that Monopolys are frowned upon by economists. It creates an untrue reflection to the cost to the society. With a monopoly the business can charge any price that they see fit and therefore it creates and unbalanced marginal cost. Chapter 3 discussed the idea that it is not just the United States Economy that is affected across the world. Many times as we are going through our lessons, and we, as a class are discussing economics, I fail to remember that there are many more markets in the world then just the United States. The chapter discusses the history of economics and how they work in the different social environments. They were very straight forward and very self explanatory. References: Colander, D. C. (2010).Economics (8th ed.). New York, NY: McGraw-Hill.