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Maximizing Profits in Market Structures

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Maximizing Profits in Market Structures

Course: XECO/212
Date: August 12, 2012 Maximizing Profits in Market Structures One cannot go into business these days without running into competition. It is the American way to improve on an existing business and market the business as the best, or believe the idea for a new business is so unique, competition is little if any. A competitive market has two characteristics, the goods offered are all basically the same, and there are a lot of buyers and sellers. “Each firm is so small to the market that it cannot influence the price of its product, and ends up taking the price as given by the market.’ Therefore the goal of any competitive firm is to find a good strategy for profit maximization, which is usually producing as much product as they believe will bring them more profit. A perfect example of a competitive business is the Dollar Store, or Dollar General, there are so many of them offering the same merchandise that the prices for things that cost more than the one dollar, generally have the same price from store to store.’ Buyers and sellers in competitive markets must accept the price the market determines, and are considered price takers’ (Mankiw, N. G. (2007), which is a barrier to being able to generate more profit. However there is a third condition in characterizing competitive markets and that is they are able enter and exit the market freely. Competitive markets do not fall into the categories of Monopoly or Oligopoly because they are neither the largest offering a single product, nor one of a few offering the same product. There are a number of companies that have a monopoly, meaning it is the single producer of a product of which there is no close substitute. One such company is Monsanto which controls 98 percent of the soybean market, and also owns 79 percent of the corn

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