Maximizing Profits in Market Structure Paper
There are several different types of markets found in an economic structure. Each is vastly different, yet some with subtle similarities. There are three main market structures most often considered: competitive markets, monopolies, and oligopolies. Each of these are defined by their characteristics, price determination, output determination, barriers of entry, and the specific roles that they play in within the economic structures of their region. Competitive markets, often known as perfectly competitive markets (Mankiw, 2007), are defined by a few characteristics that separate them from the other market structures. In a perfectly competitive market there are many buyers and sellers, and the goods and service offered by these sellers are very similar (Mankiw, 2007). The text uses milk as an example (Mankiw, 2007). Milk is a product where there are many different sellers that sell this product, where each seller only has slight variation on the product. However, the product of each seller is largely similar. These perfectly competitive markets have little control over the price of their product. The conditions of many sellers and similar product permits little price determination by the seller. The sellers are forced to take the market price as a given (Mankiw, 2007). If a seller was to raise their price even slightly, in an effort to increase profits, consumers would simply shift to another seller. Therefore, a single seller must stick to the market price. These buyers and sellers in this type of market that must follow the given market price for a product are said to be price takers (Mankiw, 2007). Price takers must follow the market price and have little control over price in terms of maximizing profits. Sellers in this type of market must find alternate ways to maximize profits. Since they are held to a certain price in order to remain competitive in a market, they cannot be flexible in this...
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