Name Class Year: Summer 2013 ECO 202-001 Topic: Short-Run Decisions and Long Run Adjustments of Firms Facing Competition Abstract Competition is a factor that organizations operating in the perfect market cannot avoid. The main objective of every firm is profit maximization…
Download file to see previous pages...
However, not all situations can the management plan on how to counter the competitors. In most cases, these situations arise due to unavoidable circumstances facing an organization. Whenever such situations arise, an organization’s management has to take drastic measures of solving the problem. How firms solve the problem of competition in the two scenarios forms the main discussion of this paper. Short-Run Decisions and Long Run Adjustments of Firms Facing Competition Introduction Competition occurs in perfect market structures where firms operate in a perfectly competitive market structure. In perfect competition, many small firms involved in the production of identical products with perfect access to resources and knowledge characterize the market structure. Firms operating in a perfectly competitive market structure face a horizontal and perfectly elastic and demand curve, a situation where marginal revenues are equal to average revenue. Characteristics of perfectly competitive markets include perfect knowledge, freedom of entry and exit of firms, production of homogenous and identical units of output and many firms in operation. The structuring of a perfect market does not give an opportunity to a single firm to either influence the market price or market conditions, there are no governmental regulations and the assumption there is no existence of externalities. Body Faced with the problem of competition, organizations have to device ways and means of preserving their relevance in the market. Various factors affect the relevance of organizations in the industry they operate. Jain and Khanna (198) assert that quality and the popularity of an organization’s products among the customers determine the market share of that company in the market it operates. Competition indirectly acts as a quality controller. As companies increase their fight for a bigger cake in the entire market, they apply a number of measures. Firstly, companies increase their focus on the quality of products provided to the market while at the same time strives to offer the best prices in the market. Pricing is not an influential factor as high-end markets have indicated. Quality is the biggest factor influencing the market dynamics and purchasing behaviours of customers. Compromising quality of products adversely effects on the customers base of a company. Companies known to high quality products and services are associated with large market shares and subsequently report high revenues and profits. While laying down strategies for winning their competition, organizations apply a number of means and ways. Although every organization uses unique strategies in the market geared towards increasing its revenue sales, there are similar steps that organizations use to achieve these results. Either, an organization can opt for long term or short-term competition mitigation factors. While long-term plans needs a solid strategic plan and implementation schedule, short term decisions could be spontaneous and reactive. Reaction is a situation where a company facing high competition from other firms operating in the same industry takes drastic measures of countering that competition. Mainly, the management as measures of last result takes such measures. However, the management of an organization should be adequately prepared to counter any in eventualities whenever they occur in their operations. Whenever
...Download file to see next pagesRead More
Cite this document
(“Micro Economics - Competition Essay Example | Topics and Well Written Essays - 1750 words”, n.d.)
Micro Economics - Competition Essay Example | Topics and Well Written Essays - 1750 words. Retrieved from https://studentshare.org/macro-microeconomics/1482603-micro-economics-competition
(Micro Economics - Competition Essay Example | Topics and Well Written Essays - 1750 Words)
Micro Economics - Competition Essay Example | Topics and Well Written Essays - 1750 Words. https://studentshare.org/macro-microeconomics/1482603-micro-economics-competition.
“Micro Economics - Competition Essay Example | Topics and Well Written Essays - 1750 Words”, n.d. https://studentshare.org/macro-microeconomics/1482603-micro-economics-competition.
The comparison is carried out between these two factors. In the ratio of Ann’s to peter’s case, Ann has a lower utility function than peter because peter is on medication. The amounts that peter will spend on medication makes him more vulnerable in spending.
It also analyzes the price and output changes that will arise as a result of transition from monopolistic competition to a monopoly. This paper also proposes the best market structure to be taken by Wonks in the potato chip industry so as to benefit all the stakeholders.
Microeconomics is therefore the study of how firms, individual, and households allocate the resources at their disposal to satisfy their limitless and recurrent need. Since resources are limited, it is important for the consumers to rank their demands and wants in the order of preferences.
vaccinations against infectious diseases). Briefly suggest how government might intervene to correct this under-provision? 5 (C) The Consumer Price Index (CPI) is the official measure of inflation in the United Kingdom. Why might CPI not be an accurate measure of the costs of living for any given individual consumer?
Therefore the author has termed Google as being operating as a monopoly in the search market. The author refers that Google has been dominantly playing its role in the search market and is this dominance is favored by governments as they are not placing any restrictions on the practices adopted by Google.
Short run equilibrium of a firm can be derived based on the total revenue and total cost and marginal revenue and marginal cost and marginal revenue and marginal cost. As firms are price-takers, each firm in an industry tries to maximize its profit by adjusting the output to a level where Marginal Cost (MC) =Marginal Revenue (MR).
The product can be protected by a patent which the company can utilize for many year before it becomes available to the rest of the industry. Kodak and xerox dominated the market for many years in this manner.
Also, a company can build brand value or brand equity
Individual consumer’s focuses on maximizing their utility subject to their budget line (MagrabI, 1991). On the other hand, producer’s aims at maximizing their profits subject to their production Isoquants (Mceachern,
where the slope of the indifference curve equals the slope of the budget constraint. At this point, the consumer obtains the best combination of the two goods that gives him/her the maximum utility of the given budget constraint.
(c) If the
5 Pages(1250 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Micro Economics - Competition for FREE!