Maximizing Profits in Market Structure

1168 Words5 Pages
Maximizing Profits in Market Structure XECO/212 9/3/12 Maximizing Profits in Market Structures To define the structure of a market then you would be counting the amount of firms that exist in the market, or the blocking of the entry of the newly created firms, and the dependence of other firms the influence pricing and profits. We live in a world were markets rule in the capitalist economy. If we look at the goals of a firm, it is to bring in profits at a maximum level. When competition is at its peak firms find ways to max out profits to equal marginal cost (MC) to marginal revenue (MR). This means when revenue is used for producing more quantity the more cost is created in the production of that quantity. Increasing a production will in most cases increase your profits if the out-going MR is larger than the MC. The opposite is true if MR is now lower than the MC, you must slow production to turn profits. The conditions can be used to generalize the situation like P=MR, MR=MC, or P=MR=MC; but at the end of the day all cost related conditions are variable. What we are looking at above are perfect competition, monopoly, and oligopoly. Also given the variable nature of the market structures, the economists will put more stock into society impacting market structures that look more desirable. There are many key differences or characteristics in the organization of a market and they are; (1) the amount of firms in the market. (2) The controlling of a products price (3) Product type (4) Competition with non-price (5) Barriers that new firms face. When we need to classify a market structure the amount of firms that exist selling the same product is weighted heavy. This number can show economists the extent of the competition that resides in that industry. When we talk about a monopolistic competition, the numbers of firms are very large and those
Open Document