StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

MBA - Economics - MicroEconomics - Essay Example

Cite this document
Summary
The analysis that we have undertaken involves two market structures- the Perfect Competition and Monopoly. Before we comment, we need first to define the two concepts. Perfect Competition conditions exist when firms selling an identical product are all are price-takers and have a relatively small market share…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.5% of users find it useful
MBA - Economics - MicroEconomics
Read Text Preview

Extract of sample "MBA - Economics - MicroEconomics"

Download file to see previous pages

They are characterized by a lack of economic competition for the good or service that they provide and lack of viable substitutes. Results would show that under the Perfect Competition scenario, attaining profit maximization equilibrium at the given equations for cost and pricing would result to a loss for the company. The output may be high and the price low as compared to the Monopoly scenario but the overall effect is that the company does not gain from the venture. It is not surprising that it turned out that the firm will profit more from the monopoly situation because consumers do not have any alternative.

Monopolies are expected to produce less and set it a higher price because there is no substitute available on the market. Consumers need the product and so they will buy in at whatever price is set thereby resulting to a decline in social welfare. The lack of competition results to less concern for efficiency and innovation. Products would experience little or no improvement. Since there are no available substitutes the consumer is forced to use the product which further leads to decrease in consumer welfare.

Nonetheless, there is a concept which states that the loss of efficiency of firms can raise a potential competitor's value enough to overcome market entry barriers or provide incentive for research and new alternatives. The government may even step in and break the monopoly. According to the theory of contestable markets, monopolies can be forced to behave as if there were competition because of the risk of losing their monopoly to new entrants especially when barriers to market entry are low.

It might also be because of the availability in the longer term of substitutes in other markets. This is seldom the case however. Under the perfect competition, we were able to determine that the firm would be making a loss. Does it follow then we should stop production The answer lies on considerations of different total costs levels and whether the firm is operating in the short run or in the long run. Why do even question whether it should continue or not Common sense would tell us that if we are not gaining anything from a venture then we should withdraw from it.

However, production entails fixed costs which the firm should account for whether they manufacture or not. It may turn out that continuing production would be enough to cover the fixed costs. When the firm is geared for short run perspectives but is registering losses, it is advisable that it should still continue production provided that the Total costs (TC) is greater than total revenue (TR) and that total revenue is equal to total variable cost (TVC). If it fails to achieve one of these conditions, then it would be advisable to shut down so that they will only pay for the fixed costs.

Even if the firm stops producing, it will have to continue to meet the level of fixed costs. Since whether the firm produces or not, it will have to pay fixed costs, it is better for it to continue production in an attempt to decrease total costs and increase total revenue, thus making profits. In the long run scenario, the condition to continue producing requires the price P to be higher than the Average Total Cost. If P is equal to ATC, the firm is indifferent between shutting down and continuing to produce.

This case is different from the short run shut down case because in long run there's no longer a fixed cost because everything

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“MBA - Economics - MicroEconomics Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1516436-mba-economics-microeconomics
(MBA - Economics - MicroEconomics Essay Example | Topics and Well Written Essays - 750 Words)
https://studentshare.org/miscellaneous/1516436-mba-economics-microeconomics.
“MBA - Economics - MicroEconomics Essay Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/miscellaneous/1516436-mba-economics-microeconomics.
  • Cited: 0 times

CHECK THESE SAMPLES OF MBA - Economics - MicroEconomics

Economies of Scale

The main idea of this study is to analyze firms experiencing economies of scale.... The author assesses Internal Economies of Scale, Various types of economies of scale, Technical economies, principles of multiples, risk-bearing, disadvantages for consumers of firms.... hellip; The concept of small is beautiful can hardly be accepted in this globalized economy when there is fierce competition among the firms for marketing similar type of products....
9 Pages (2250 words) Assignment

The Theory of Games: Game Theory

This paper “The Theory of Games: Game Theory” will deal with the concept of Oligopoly and an attempt has been made to explain the term oligopoly and the key features of an Oligopoly market.... A deep analysis of Collusion and competition has also been conducted.... hellip; The author says that there are a few firm that are present in the oligopoly markets....
6 Pages (1500 words) Term Paper

Managerial Economics

In the paper “Managerial economics” the author discusses four factors among many that can affect the decision to pursue an MBA degree in the Kansas City area.... List four factors that affect the demand for mba degrees in the greater Kansas City area and How those factors affect the demand for mba.... Not that I am not asking about a company hiring a person who has an mba degree, I am asking about a person like you who is pursuing an mba degree....
2 Pages (500 words) Essay

Macroeconomics written paper

The major objective of indifference curves is to analyze how rational consumers choose between two goods.... This means that a consumer of two indifferent goods uses Indifference curves to analyses how change in… An indifference curve shows all the possible combinations of two products between which a person is indifferent....
5 Pages (1250 words) Assignment

The Economics of Natural Resource Availability

In the Keynesian view, there are many macroeconomic variables, which have an impact on the individual's microeconomics functions.... This paper "The economics of Natural Resource Availability" focuses on economics where the application of all the variables ends with the word business.... In business economics one should talk about the market structure, entering into any business every business management must design the policy or strategy for the future profits and revenues....
7 Pages (1750 words) Essay

Characteristics of Monopoly Market Structure

?microeconomics for MBAs: The economic way of thinking for managers.... And in less elastic markets he/she charge higher prices thus selling MICRO economics Monopoly is a market structure with a single seller of a specific product that has no close substitutes.... ?Principles of economics.... ?economics.... ?economics for today....
2 Pages (500 words) Essay

The Demand and Supply Aspects of Copper

Firstly the paper intends to elaborate on the factors that affect the demand, supply and price of copper and results to fluctuations.... Copper is an important material that influences the economy to a… Price of copper and its fluctuations in the business of a nation affects the economy considerably....
4 Pages (1000 words) Essay

The Causes of the Recent Financial Crisis in Britain

The author of the current research paper "The Causes of the Recent Financial Crisis in Britain" primarily states that a financial crisis is a situation which may occur when assets and financial institutions suddenly lose a lot of their value.... hellip; In the 1800s and early 1900s, most of the financial crises were related to banking panics with numerous recessions taking place during these panics....
10 Pages (2500 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us