Angela D. Nicol
University of Phoenix
ECO 365 Economics
Differentiating between Market Structures
The simulation entitled ‘Differentiating between Market Structures ‘was based upon a transportation company called the East-West transportation Inc. The “transportation company has four divisions that they operate; Consumer Goods, Coal, Chemical and Forest Products. Each of these divisions operates within four different market structures. The market structures that they operate in are Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition. In this paper the author will summarize the simulation and give a brief understanding of each step in the decision process.
The first scenario in the simulation asked the author to decide if operations in the Consumer Goods Division should continue or should it be shut. The author decided that it was in the best interest for the company to continue operations in the perfect competition market and force the company to minimize its losses. To minimize the loss for the company, the number of shipments must decrease to $6.75 million, bringing the loss down to $150.03 million dollars. According to the simulation the markets demand curve is in a downward slope, where each supplier perceives the demand curve to be perfectly elastic at a given price. In this portion of the simulation the demand curve and cost structures show that suppliers/seller have to produce and yield at a maximized profit level.
The second situation in the simulation asks the author to look at the coal division, which operates in the monopoly structure and determine how to maximize the profits. The company has the option at this point to raise the price but by setting the price at the highest value available does not lead to maximize profits. Marginal Revenue MR=MC Marginal Cost the author has to extend the quantity line so that it meets with the demand curve,... [continues]
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