Pick a specific industry from one of the market structures and explain how it would function and maximize profit.
Monopoly: Monopoly refers to a company that is a single seller of a product or service in the market. It holds the entire market, controls prices and supplies and puts an end to any competition or it doesn't even let competition get a start because of high market entry costs and legal restrictions. A monopoly would maximize its profit by setting the price of the product or service without having to consider what the competition's price is. This usually results in higher prices for the consumers than a market with multiple businesses providing the same service or product
What are the pros and cons of the various market structures in terms of benefiting consumers? Which market structures do you think benefit consumers more than others? Explain by using examples.
Perfect Competition: Perfect competition gives everyone in the business a fighting chance. There are not government involvement. One disadvantage of perfect competition is that the larger companies with many have been established and always try to over take the smaller developed businesses.
Monopoly: in a monopoly market the prices are most of the times stable. This happens because there is only one firm involved in the market that sets the prices. This also maximizes profit. On the other hand a monopoly has to deal with unhappy consumers and price discrimination issues.
Oligopoly: an oligopoly exists when there are few number of suppliers in the area. However, these firms have the ability to influence the entire market. Price caparisons can easily be made by the consumers of this type o market.
Monopolistic competition: One advantage of a monopolistic competition is the ease of entrance in the market. This also creates an area for consumers providing a number of different products to choose from. However, considering the number of competition, companies tend to produce too much of the product creating a lot of waste.
We are exposed to a number of advertisements on TV, in radio and in other places daily. Which market structures are the most dominant in the advertising industry? Which market structures don't need to advertise? Why?
Monopolies are the sole provider in the market. Therefore, they are the company with a certain product. It this company is big enough to be known then the name of the company or product will speak for itself and advertising will not have to be an expense for the company. The structure that is in most need of advertising would have to Oligopolies. There are a limited number of suppliers for the products. These may not be known as well and will need to be advertised in order to notified consumers of the supplier's locations and products provided.