As the time horizon increases, variable costs rely less on existing factors and restrictions and therefore will begin behaving differently which will in turn affect the cost of production (Wright, 2007). The second way a firm that’s into profit maximization can decide its greatest level of output is by way of the marginal revenue -- marginal cost method. This is done by subtracting the marginal cost from the marginal revenue that a product generates. Using marginal cost and marginal revenue as the bases, profit maximization will be obtained at the point when marginal revenue is equal to marginal cost. If the marginal revenue is greater than marginal cost this would be when a profit maximizing firm would need to increase production until marginal revenue is equal to marginal cost.
Monopoly is where only one company is providing a good and or service. Businesses may maximize profit in each market type by agreeing upon a lay down price. Perhaps businesses cannot agree upon a set price then the price is going to be above marginal cost. If the company is in competition with other companies in the same market, making decisions about prices, how they advertise, output, etc, can influence the profits of every, if not all companies in the same market. This is where management gets involved to ensure the company that their strategic way of thinking and planning can and will allow the company to gain
The third market structure that is between competitive market and monopoly is oligopoly, which firms can be either in-cooperative of cooperative. The difference between the rests of the other market structures is that in the oligopoly “there are few mutually interdependent firms that produce either identical product or different products.” (Humboldt State University, 2000, para. 6) Out of all the other examples, there are more examples of oligopoly in the world, for example, banking and, Coca-Cola
It is important for market participants to know how the invisible hand functions so they can all benefit by understanding how self-interest regulates the markets supply and demand. 3. Use the demand curve graph found at the following link to answer the questions that follow. • How would point A be represented as an ordered (x,y) pair? Answer: 20, 24 (Quantity, Price) • What does this curve show?
Profit Maximization is the process that a firm uses to establish where the best output and price levels are, in order to maximize its return. There are two primary methods that can be used to establish profit maximization. One method is the Marginal Revenue minus the Marginal Cost (MR-MC) method. When utilizing this method economists assume that profit would be at its highest when MR and MC are equal, which denotes that for every item made MP=MR-MC. When / if MR is higher than MC then MP would result in a profit for Company A.
Natural Monopoly Case Telecommunication Law & Regulation Natural Monopoly Case What is Natural Monopoly? The concept natural monopoly emerges when the production of service or product can be provided by one firm more efficient and cost effective than two or more firms. In a natural monopoly there is a high fixed cost and company must overcome large barrier to entry its market. An example of barriers that a company must sustain consists of high startup costs, specialized technology, or difficult licensing and regulation requirements in an industry, limit the number of possible entrants into the industry (Hill, 2014). This means that a company is able to provide the lowest price and in addition it’s one of the fewest company’s which is capable of overcoming the challenges of startup cost in order provide a cost effect product or service for its consumers.
Target could have very well been in the monopolistic competition structure but did meet some of the structure points. Monopolistic competition structure has many firms and do not usually take into account the responses of other firms. This was the main difference between oligopoly and Monopolistic competition. Wal-Mart, K-Mart, Costco, and the few others in the scope of this type of retail chains are more considered a few than many. They all tend to react to each other’s
National business is a business which is located in the whole country. These types of business normally franchise this is means the governments allows the owner to sells their product or service. International business is a business which is located in more the one country. An example of this would be Tesco or McDonald’s because they’re both located in different countries such as America and England. Size and Scope of Business Small size and scope businesses are normally privately owned or sole traders this is because they have a small amount of employees which means they can’t afford to have more in a small shop.
Many factors must be considered when differentiating between market structures. One must first understand the roles of public and private goods, common resources, and natural monopolies. One must also consider how supply and demand of labor will affect market equilibrium. Once these factors have been outlined, it is possible to consider a specific organization and how it fits into the appropriate market structure. To compare and contrast multiple units, each unit needs to be defined to identify properly the similarities and dissimilarities.
Econ340: Practice Questions on Review of Math concepts 1. Given the following demand function: Q = 50 – 0.5P a) Determine the level of output Q* and price level, P*, that maximizes total revenue. b) Show that Q* determined in (a) above maximizes, rather than minimizes revenues 2. The Bowden Corporation's average variable cost (AVC) function is given by the following equation (where Q is the number of units produced and sold): AVC = 25,000 – 180Q + 0.5Q2 a) Determine the output level (Q*) that minimizes AVC. b) How could you know that Q* in part (a) minimizes rather than maximizes AVC?