'Maximizing Profits in Market Structures Essay\r'

'Profits in Market Structures Market Structures atomic number 18 described as a particular relationship surrounded by the purchasers and the sellers of goods and operate in a specialized grocery (Mathias, 2000). lead different types of market place place structures are emulous markets, monopolies, and oligopolies. distri thoively of these market structures has a particular placed of characteristics that divulge it and separate it from the others. These categories are in addition separated by the way they each use value and produce to calculate and maximize their profits.\r\nAnother difference between these three categories is the presence of barriers, which may be evidence to encourage current companies to exit, as well as wise comers to enter that market. Also, each of these three structures has a different effect on the economy, some having much go through on the market than others. With all these differences the specific market structures all drive whiz inti macy in common, they all rely on egress and demand to determine how to maximize their profits. Competitive markets ready two primary characteristics that separate it from other market structures.\r\nThe first characteristic is that, within a matched market, in that respect are a large turn of buyers and sellers. Second is that the cropion being sold is the alike among all companies, making the harvest-festivals completely interchange adequate to(p). These cyphers install the market agonistical by insuring that no single buyer or seller stomach control the market terms. Therefore, in order for companies within a war-ridden market to maximize profits, they must get an equalizer between the damage frivol awayd for a intersection point and quantity that they produce.\r\nThis means that a company must take the price being press down ond for a product and subtract the address of making the product to figure out where they are equal. As the price of a product in a c ompetitive market is controlled by the market as a whole, the seller must castigate its output to adduce maximum profits.\r\nThis is important because the company’s revenue enhancement is in direct correlation with the price, so if the price goes up $1. 00 per unit past the revenue also leave behind go up the same amount. For example, if a product has a fixed damage of $1. 0, and the vari open quantity cost of $3. 00 and the product sells for $5. 00 then the company has to adjust its output to balance that amount, so that it does not cost over $5. 00 for each product sold. One factor that can affect the output of a product, is the deficiency of barriers that are present for anyone wanting to begin or exit a company. If the amount of sellers change but the demand does not then current companies will need to decrease the output or gamble the price dropping below the profitable levels.\r\nThe competitive markets can excite a positive feign on the economy because the disputation helps control the cost of products. If there was flyspeck or no competition, then companies would have the ability to raise prices as spicy as they wanted to, especially in the shield of items that are necessities (Mankiw, 2007). The characteristics of a monopoly are first, that there is scarce one company selling a product and there are no substitutions. Second, there is no competition, the product is exclusive to one company.\r\nThird, in a monopoly the company completely controls the determine of its products and can charge as much as they believe a customer will pay (Mathias, 2000). In phone line to a competitive market, a monopoly can chose what to charge for its product. However, the price must be set harmonise to what consumers are willing to pay, while still maintaining a profitable level of production. It is important to control the output of product so, the price must be set to where the company will still be able to sell a large amount of product while maximizing its profits .\r\nThere are substantial barriers to entering a market that has a monopoly. One barrier is the inability to compete in the market that is controlled by one company. A refined business starting out in finish with a large monopoly would incur substantial cost to begin production and they would have to increase their prices to line a profit. This could also be a caper if the monopoly holds the rights to the raw materials that it takes to make a product. Therefore, entering a market that is controlled by a monopoly is very difficult.\r\nHowever, it is affirmable for a market to be controlled by a niggling number of companies, similar to the way that a monopoly controls a market. The economic impact that monopolies have can be outrageous prices or modified availableness of goods and services to many people (Mankiw, 2007). An Oligopoly is when a expressage number of companies control a specific market, with little competition (Mathias, 2000). Some character istics of an oligopoly are that the companies all make the same or similar items, so they are substitutable, and there are only a hardly a(prenominal) companies that produce this good.\r\nAs there are a limited amount of producers these oligopolies are also able to set the price of their goods, using things like advertisements and warranties for competition between businesses. Because there are only a few companies making a product the members of an oligopoly have to control the production of their goods in order to control the pricing. If one of the companies decides to increase production then there will be an abundance of supply without the unavoidable increase in demand. This means that the cost of the product will have to go down to fork out to increase demand.\r\nThese companies have to maintain a lulu level of output in order to maintain price, giving them the best profits. The companies that are in this small circle of businesses, try very hard to vertical barriers in f ront of anyone who may think round entering their market. By stopping the emergence of new companies the oligopolies can continue to control the market. The affect that oligopolies have on the economy is the ability to control pricing and supply of products, similar to the impact that a monopoly has (Mankiw, 2007).\r\nIn conclusion, each market structure plays a bureau in the economy with the focus of these companies centering on profits. They monopoly can be beneficial if the lowest price for consumers comes from having only on producer but in many cases a monopoly means high prices and limited supply. An oligopoly does have less control over pricing only because they are sharing the demand and antimonopoly laws prevent them from gathering together as one monopoly, to maximize profit.\r\nThe competitive market is the most economically friendly market because it has to compete to get customers and this helps prevail prices affordable and does not limit the availability of goods t o the public.\r\n'