Market_Structure_and_Maximizing_Profit

Market structures, there are four structures in the characteristics in the market is known as perfect competition, monopoly, monopolistic competition, and oligopoly. In the report, I will sum up each market structure and explain what they are and how they work. Reporting about the maximizing of profits in the company and explaining how the three constraints work to maximize the profit of a business, maximizing the profit of the product being produce and the best price possible for the company to make a profit to survive. If the profit is not made the company at a loss can close their doors. Market structure is very important to maintain the cost of a product so a company can stay in business. Here are some of the characteristics in the market structure: “The characteristics are: (a) number of firms in the market, (b) control over the price of the relevant product, (c) type of the product sold in the market, (d) barriers to new firms entering the market, and (e) existence of non-price competition in the market” (Advameg, Inc., 2010). To explain a little bit about each character the first one being number of firms in market. A huge amount of competition in today’s market according to the economics of the product determines the number of industries making the product. In perfect competition and monopolistic competition there are only a certain number of industries that put out the product. In oligopoly there is only a few that put out the product, and the monopoly is only one that puts out the product, they can set their own price because the industry is the only ones that make the product. Control over the price of the revel in product is to keep control over the product they have to sell to another part of the characteristic. Monopolistic and oligopoly have the majority of control of the price to sell the product. In Monopoly has almost all control over the price of the product to be sold. Types of products sold in the market consist under the law if they are making the same product or not. In monopolistic the product has to be made identical to all the others. In oligopoly the product is slightly made different and in the monopoly they are the only industry that makes the product. Barriers to the new firms entering the market are how they choose to enter the market. Barriers is very easy for the monopolistic competition to enter the market, it takes is a very low payment to enter. Oligopoly, on the other hand, takes a very high investment to know the market. Trying to enter the monopoly does not exist because they are a have the market and will not share. The existence of a non-price competition in the market is the advertisement of the product. In monopolistic they use very little advertisement to sell their product. In oligopoly they use of advertisement is very heavy and in the monopoly is even more heavily used an average advertisement to sell the product. Some of the barriers to enter in to the marketplace are advertisement, control of resources, cost advantages independent of scale, customer loyalty, government regulations, economy of scale, inelastic demand, intellectual property, investment, network effect, predatory pricing, restrictive practice, research, and development, supplier agreement, sunk cost, and finally vertical integration. Some of the barriers to keep people from entering the market can be the lack of education and a business license and also the monopoly if the law says someone already is making the product. The barriers start here to keep the competition down and to keep the price for the regulated products to keep producing. With each role the market structure plays in the economy, the statement I found about free market says most of it, “Free market system in which decisions regarding resource allocation, production, and consumption, and price levels and competition, are made by the collective actions of individuals or organizations seeking their own advantage. In all market economies, however; freedom of the markets is limited and governments intervene occasionally to encourage or dampen demand or to promote competition to thwart the emergence of monopolies“ (, 2010). Maximizing profit to protect the best price out of a product being produce, and can also mean the manufacture the most achieving sales growth or greater market sales. Many firms may analyze their cost into two groups: the first cost being fix costs and the second one on the variable cost. Some other fixed costs can be like rent, maintenance, and even renting a car. Veritable cost is the material that it takes to make the product. Variable cost and fixed cost equals total cost of the product. Sometimes revenue that is like help from the government can help cut costs of the product. Knowing the firm’s demand curve to computing the price, which to sell, the cost at which quantity demand equals profit maximizing the output is the correct price to sell the product. Compare running a business and keeping the business operations cost equal to the cost of the product to equal profit to stay in business. Competition in business is existing in actuality is a good thing to keep cost down and making the consumers happier with saving money. If consumers are not happy and are not spending money the companies can go under and lose profit and possibly closing the industry down. A monopoly is even better because the business is the only one producing the product therefore the business can set the product price as the demand for the product. Making a bigger profit makes a business better therefore, the market Monopoly business is the best future. So a company must watch they are veritable cost versus fixed cost to equal the cost of the product and make a profit to keep the business going. With the economy as of the present time, it is hard for any business that sells knickknacks, hobbies, and large expensive items like cars, houses, boats, and motorcycles, exist in actuality to say of float. With government- subsidizing trying to help businesses stay in business, the future of business will change as for the demand of the product will change. Knowing what the consumer wants will have a big effect on the economy of the market structures and the maximizing of profits. References: Advameg, Inc. . (2010). Reference for Business. Retrieved from http://www.referenceforbusiness.com/encyclopedia/Clo-Con/Competition.html (2010). BusinessDictionary. Retrieved from http://www.businessdictionary.com/definition/market-economy.html