Yet, as much as this seller can price discriminate, the success of such a pricing policy depends on whether consumers regard the product as a necessity. This is because the product sold is homogenous and in abundant supply, making it impossible for any one seller to differentiate its product or offer price discrimination sales techniques.
Profit-Maximizing Output Before a price is set, all market structures try to determine the level of output at which a business can best run its internal operations. In an oligopoly, there are some sellers in the market who make similar but not homogenous commodities.
Yet the availability of some substitutes still affects how high a business can set its price.
If the extra revenue is less, the manufacturer may cut back on production to prevent breakages from overproduction in the assembly line.
Monopolistic Structure Because the monopolist is a one-seller market, the price set is most flexible compared to the farmer in a perfect competitive market. As a result, the price set in this market is not as low as the marginal cost of production as seen in the perfect competitive market.
This creates an opportunity for the sellers to brand their products and offer pricing techniques based on the perceived quality of their brands. An example is a farmer who produces homogenous crops such as corn. Share on Facebook Determining where to set the price of a product is a decision all business owners wrestle with.
Oligopolistic Market An oligopoly is a market structure that has traits of both the perfect competitive and the monopolistic market.
Perfect Competitive Market A perfect competitive market is one where even at the profit-maximizing output, no one seller has a particular advantage over other sellers in the market. Every business would prefer to set its price at a level where it can make some profit or at least cover its costs.
A toy manufacturer, for example, will want to operate at a level where the extra revenue received is enough to cover that extra cost of production.
There are always many factors at play; some depend on the production cost, while others depend on the number of buyers and sellers in the market. If there is more revenue to be made, the manufacturer will increase production.
Some may stop buying the product altogether even if it has no other substitutes. Because of the level of competition in this market structure, the price charged is no higher than the marginal cost of production.
The monopolist can set a price that is higher than the marginal cost incurred in making its product.Maximizing Profits 2 Maximizing Profits in Market Structures Paper The structure of a market is defined by the number of firms that are competing in that market, along with factors such as: the ways in which these firms are alike or different, and the obstacles that exist in any new firms entering that market.
- The Structure Of The Market Structure Of Oligopoly And The Difficulty In Predicting Output And Profits Market structure of oligopoly Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industry's output can affect competitors.
Profit Maximization is when the goal of the company is to have the highest profit possible. You have to take into account the competition structure you are in to properly implement this theory. There are three types of competition structures: monopoly, perfect competition, and real world.
In a monopoly market structure the prices are pretty stable. This is because there is only one firm involved in the market that sets the prices since there is no competing product.
In other types of market structures prices are not stable and tend to be elastic as a result of the competition. The structure of a market is defined by the number of firms in the market, the existence or otherwise of barriers to entry of new firms, and the interdependence among firms.
Maximizing Profits in Market Structures Maximizing Profits in Market Structures Competitive Markets The basic characteristics of a competitive market are one of many suppliers provides basically the same goods or services.Download