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Competition in Smartphone Markets - Essay Example

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In the paper “Competition in Smartphone Markets” the author analyzes the products sold by the different competitors in the monopolistic competition market. He states that smartphones falls into monopolistic competition. Close substitute products have greater unity of close elasticity…
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Competition in Smartphone Markets
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Competition in Smartphone Markets

Download file to see previous pages... For example, Samsung manufactures and sell its products, no other company can make Samsung products. This gives the company a chance to be in the monopolistic competition market. Development of monopolistic competitors in markets is driven by the profits that other firms are making in the market. Firms can make high profits normally called super normal profits based on the brands of their products that make the customers to be loyal to them. The following model shows monopolistic firms making super normal profits (Arnold, 2010). Super normal profits made by monopolistic competitors are indicated by the rectangle PXYZ. The super normal profits arise because the firm is making products of quantity OQ where the profit is at a maximum. This is indicated by the intersection of MC and MR where MR=MC. The price of the products is shown by OP and this is dictated by the demand curve AR. The intersection of MR and MC gives an equilibrium price XQ. The equilibrium price is greater than the average cost indicated by YQ. The supernormal profits are indicated by XY that is the difference between XQ and YQ. To get the total super normal profits, XY is multiplied by PX and the result is the area of the shaded region. Clear analysis of the above graph shows that the price charged (P) is above the average cost (Arnold 2011). The above representation when integrated on one of the smartphones firms will attract other firms to the market. This is because it is free to enter into the market and the firms are motivated by the profits which a firm in the market is making because the graph is sloping downward. The entrance of other firms to the market makes changes in the economic model. In this analysis Apple, the Smartphone maker of the iPhone, is used as a monopolistic competitor in...
Super normal profits made by monopolistic competitors are indicated by the rectangle PXYZ. The super normal profits arise because the firm is making products of quantity OQ where the profit is at a maximum. This is indicated by the intersection of MC and MR where MR=MC. The price of the products is shown by OP and this is dictated by the demand curve AR. The intersection of MR and MC gives an equilibrium price XQ. The equilibrium price is greater than the average cost indicated by YQ. The supernormal profits are indicated by XY that is the difference between XQ and YQ. To get the total super normal profits, XY is multiplied by PX and the result is the area of the shaded region. Clear analysis of the above graph shows that the price charged (P) is above the average cost (Arnold 2011).
The above representation when integrated on one of the smartphones firms will attract other firms to the market. This is because it is free to enter into the market and the firms are motivated by the profits which a firm in the market is making because the graph is sloping downward. The entrance of other firms to the market makes changes in the economic model. In this analysis Apple, the Smartphone maker of the iPhone, is used as a monopolistic competitor in the market. The profit which is made by the company is shown on the graph. The profit is just for a short-run. In the long-run, other competitors enter the market. ...Download file to see next pagesRead More
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