Differentiating Between Market Structures

Topics: Supply and demand, Monopoly, Economics Pages: 3 (834 words) Published: January 25, 2009
Differentiating between Market Structures The different market structures are shown in a simulation provided by University of Phoenix called “Differentiating between Market Structures” (UoP, 2008). The simulation is based on a transportation company called East-West Transportation Inc. “East-West Transportation has four major divisions for the various kinds of products it transports – Consumer Goods Division, Coal Division, Chemicals Division, and Forest Products Division” (UoP, 2008). This paper will address the advantages and limitations of supply and demand, effectiveness of structure, and maximization of profits. The four divisions of East-West Transportation are operating in different market conditions; some have been profitable while others are losing revenue. The market structures represented are Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition. Two consultants offer their opinions throughout this simulation. Peter Schultz, Senior Vice President, from East-West Transportation and Tanya Roy, Partner, Brighton, Young, and Roy, Inc. share their viewpoints on all issues. Perfect Competition The first decision to be made is whether to shut down the Consumer Goods Division or to keep it running and minimize losses. Based upon advice from Tanya Roy, the Consumer Goods Division will remain continue operations. To continue operations, the East-West Transportation Company will be forced to minimize losses. The current number of hundred weight shipments is 7.75 million, which brings in a loss of $159.89 million dollars at $55 per hundred weight. To minimize the loss for the company, the number of hundred weight shipments must decrease to 6.75 million, bringing the loss down to $150.03 million dollars. Monopoly The decision to be made is how to maximize profits. Although the company has the option of raising the price, setting the price at the highest value does not maximize profits for the company. The current output is 11.08 million short...

References: Investopedia. (2009). Economic basics: demand and supply. Retrieved January 19, 2009 from http://www.investopedia.com/university/economics/economics3.asp University of Phoenix. (2008). Applying supply and demand concepts. Principles of Microeconomics; Course 365.
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