Maximizing_Profits_in_Market_Structures_Paper

Running head: Maximizing Profits in Market Structures Paper Maximizing Profits in Market Structures Paper Axia College The structure of a market is created by the different number of business competing in the market. The three market structures that will be discussed in this paper are perfect competition, monopolies, monopolistic competition, and oligopolies. The characteristics of a perfect completion are; (a) many buyers and sellers in the market, (b) the goods offered by various sellers are largely the same. Another condition that is thought to characterize perfectly competitive markets is; firms can freely enter and exit the market. Like any firm or business you must analyze the total costs, and analyzing the revenue, in which will determine the profit. For competitive firms or businesses, marginal revenue equals the price of the good. There are three general rules for profit maximization; if marginal revenue is greater than marginal cost, the firm should increase it output. If marginal cost is greater than marginal revenue, the firm should decrease its output. At the profit-maximizing level of output, marginal revenue and marginal cost are exactly equal. These rules are the key to decision making by a profit-maximizing firm. Competitive firms determine the quantity of its good to supply to their market. Because the competitive firms is a price taker, it marginal revenue will equals the market price. As far as barriers to entry in a perfect competition, I would imagine that there will be difficulties especially based on what your product or good would be. There has to be some analyzing prior to entering a perfect competitive market, especially when it comes down to supply and demand and costs. Another factor that may create difficulties for a firm that is already in the perfect competitive market could be the simple mistakes. The littlest mistake in mathematics could hurt a firm; another reason would be if the price of the good is less than the average variable cost of production.