AllBestEssays.com - All Best Essays, Term Papers and Book Report
Search

Four Different Market Structures

Essay by   •  July 15, 2012  •  Essay  •  430 Words (2 Pages)  •  1,807 Views

Essay Preview: Four Different Market Structures

Report this essay
Page 1 of 2

A market structure describes the key traits of a market ,including the number of firms or there are the similarities of the products that are being sold and the ease of entry in and out of the market. There are four different market structures, perfect competition, monopoly, monopolistic competition and oligophy. There are three rule to maximizing profit if marginal revenue is greater than maginal cost ,the company should increase it output of good.If cost is greater than the mariginal revenue than the company should decrease their output. At the profit maximizing level of output,marginal revenue and marginal cost are exactly the same . In other word the more money that the company makes the more they produce,if less money is being made then the company should decrease the goods that they are producing.Also if both cost and revenue are the same then the profits are being made. The question that is being asked is how price is being determined. Price is being determined by analyzing the total coat that it takes to produce a good and analyze the revenue in which it will determine the profit.

In a perfect competition there are many buyers and seller, output would be determined solely based on whether or not a profit is being made. Also a price will be determined on what the buyer is willing to pay for it. In our text it explains that demand curve supplys a restraint on a monopoly. Per our text a monopolist would prefer to ,if it was possible to charge a high price and sell a large quantity at a high price. This is not possible in the market. If a profit is not being made and marginal cost is greater then revenue, then output must be decreased. Therefore to find the level of output you must equate marginal revenue with marginal cost ,which would then determine the equilibrium output of goods. The question asked is to define a barrier of entry. A barrier of entry is any obstacle that would make it difficult to enter a market.

For example a barrier to entry could be if a firm would to have many loyal customers ,that could be difficult for many newcomers to overcome. Therefore this could cause a firm a barrier to enter the market as new competitors. If a firm was trying to enter a monolpoly they simpily would not be able to enter because a monopoly tend to only have one choice and no competitors. Generally a monopoly rule is to buy there product or just go without their product.

...

...

Download as:   txt (2.4 Kb)   pdf (50.4 Kb)   docx (9.2 Kb)  
Continue for 1 more page »
Only available on AllBestEssays.com