Structures and Maximizing Profits

Market anatomical structures hunt an important role in the economy today. The strategic and net maximize concepts argon determined by the type of mart structure. Market structure is best defined as the organizational and separate characteristics of a foodstuff place. (Riley, 2006) agonistical commercializeplaces, monopolies, and oligopolies tierce of the four market structures in the economy. A competitive market or perfect competitive market is a market that has m any(prenominal) a(prenominal) buyers and sellers that do not influence scathes. An example of a competitive market would be the street vendors selling bottled water along the sidewalk of a tourist attracted city.There are seeming to be many vendors and buyers alike. Most notably the influence of separately vendors input on price is low. The opposite of a competitive market is a monopoly. Monopolies affect the economy with considerable promise over supply and price. The definition of monopoly is when the s ingle seller of a proceeds controls its market and does not allow competition. Local telephone, cable, and water, which are a innate monopoly, are examples of monopolies. Each of the companies has complete control for the distribution of their outputs or go in regards to supply and prices.Oligopolies are types of imperfect competition in the market structure. An oligopoly is where only a few sellers offer similar or like harvest-tides. Consider watching a basketball game at any level of competition. The athletic wear, footwear, and accessories worn by players are more than likely Nike, Addidas, or Reebok. These companies sell products that are similar and are for the same purpose, but they are not identical. This type of market structure is also cognize as monopolistic competition. Oligopolies have considerable control over nearly of the prices of the products they sell.The characteristic of each market structure are important to go through the role of each structure. The determination of price in terms of maximise profits is best understood by following the forms of production in a given market. Profit maximizing for a fellowship or firm is utilized by using the companys profit maximizing output level. This is when the peripheral cost is the same as the product price. When a company offers products in brisk locations the bare(a) cost of the products of the new locations is a part of the marginal cost. That would be an example of a company opting to profit maximizes their production ased on change of total cost to accomplish more profit. Another consideration of a profit maximizing rule is when marginal cost equals price. A company attempting to profit will eradicate this rule closely to determine profitability. The average total cost of a good is the deciding factor in profit maximizing where marginal cost equals price and marginal cost increases. Monopolist market companies maximize profits by following the rule marginal revenue equals mar ginal cost. Marginal revenue is the change in total revenue that results from a change in output.Companies that are the single producer of a product will want to maximize their total revenue. Costs of production are low therefore marginal revenue will equal cost. agonistic markets, monopolies, and oligopolies have profit maximizing rules that compare price to marginal revenue, marginal cost, and average total cost to determine profit gain. Each market consists of parapets of entry. One of the reasons for entry is the encouragement of successful gain of profits from other companies. Consider the local and national fast food hamburger restaurants.McDonalds began as one of the first restaurants of its type followed by chains such as Wendys and Burger King. That is an example of monopolist competition at its best. A hopelessness or barrier for entry into certain(a) market structures is through honor and regulations. Creating anti-trust laws are detrimental to the formation of monop olies and their continued growth. There are three examples of business practices that present a dilemma for business entry. Resale price attention is the setting of a product price is contracted by the middleman for the retailer to sell at that given price.If the price is set from the middleman competition is suspended beca expenditure of the price being uncontrolled by the retailer. The succeeding(prenominal) business practice involves market fountain. A company that possesses market power has control of setting and changing prices without losing customers or altering the entire market. These companies are also referred to as price setters. Firms with market power normally use that power to raise prices above the competition level. (Mankiw) Predatory pricing is a debatable topic in terms of entry into a market and regulated policies. The third type of a business entry barrier is tying.Tying forces smaller businesses to strategize products based on the market power and price in equality practices of manufacturers. There are four other barrier entry pabulum for various markets. First, there is the denial of entry into a market or the lack of possible competition. Next, a company may own a key resource that provides exclusive rights to that market. Another point is when the government allows a single seller the right to produce or provide certain goods. Finally, the cost of production equals a single producer being more efficient versus the cost of production via a large number of producers.The characteristics, price determinations, and barriers of entry into competitive markets play essential roles in the economy. The characteristic of each market provides buyers and sellers to understand and make business decisions for the success of the economy. The economy as a whole benefits from how market structures abide by the rules and regulations of profit maximizing. References Mankiw, N. G. (2007). Principles of economics (4th Ed. ) Mason, OH South-Western Cen gage Learning. Riley, Geoff. September. 2006. A2 markets & Market systems. Market structures. Retrieved on January 22nd, 2012 from http//tutor2u. net/economics