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1、Table of ContentsIntroduction 错误!未定义书签。Oligopoly错误!未定义书签。Entry barriers 错误!未定义书签Non-price competiti on 错误!未定义书签Expla nati on for Diagram in Oligopoly错误!未定义书签。Pure Competitive Market 错误!未定义书签。Lower prices 错误!未定义书签Low barriers to entry 错误!未定义书签Explanation for Diagram in Pure Competitive Market与昔误!未定义书
2、签。Roles of Profit in Market Eco nomy 错误!未定义书签。Dema nd for factor resources 错误!未定义书签。Market En try 错误!未定义书签。The other two alter natives to profit maximizatio n与昔误!未定义书签。Satisfici ng behaviour 错误!未定义书签Sales reve nue maximizati on 错误!未定义书签In flue nces on a Firm in the Short Run错误!未定义书签。Referen ces 错误!未
3、定义书签。1.0 I ProductionMarco and Micro econo mic kno wledge we had lear ned in this period is mai nly to discuss about some major market structures in the en tire market now. And they are oligopoly, mono poly and pure competitive market and so on. In this case, the Virgin Mobile had entered in mobile
4、phone market in the UK, which is an oligopoly market. In this market, Oran ge, Vodafo ne, BT Cell net and One2One are the oligopolists.2.0 OligopolyWhen a market or in dustry is domin ated by a small nu mber of sellers, we usually believe an oligopoly appears. And there are two main features of olig
5、opoly:Entry barriers : It ' s a great block for the new company to be a long-run part of an oligopoly market. Usually, many smaller firms operate on the periphery on such s market, which means these compa nies cannot reach the super no rmal profits or affect much to market prices and output. Tak
6、e Virgin Mobile (VM) as an example:Before VMengaged in the mobile phone market in the UK, there were some in dustrialgia nts conq uered the market- Oran ge, Vodafo ne, BTCell net and One2One, which acco unt for a large market share. Although VMis making profit, the money it earned is far less than a
7、ny one of these oligopolist.Non-pricecompetition:As a few company be dominant to anin dustrial,prici ng can be no Ion ger an effective competitive nessfor those oligopolistic firms. Comparedwith pricing, after-sales service, exte nsion of new market and advertis ing seem to be more emphasized by the
8、m .In this case, the VM is better to promote the competitiveness in such ways - improving the after-sales quality, expa nding into new markets , build ing their own brand and so on.3.0 Explanation for Diagram in OligopolyIn the oligopolistic market, the oligopolists may react diversely tothe differe
9、ntprice variation trend of their rivals. If one oligopolistraises the price and other companies will not follow it to maintainthe market share, however, if the compa ny reduce the price and other compa nies must follow, which is to keep more market shares. It can be see n in the kin ked dema nd curv
10、e below.Before the price is higher than P1, the product demandis elastic that meansthe price raises and the total revenue will reduce. But when the price is lower tha n P1, the product dema nd is in elastic - the pricereduces and the total revenue will also do. Thus, the companymay able to reach a s
11、table profit-maximizingequilibrium at the point G, so thecompanies in the oligopolistic market can not change the priceoptio nally.4.0 Pure Competitive MarketIn the pure competitive market structure, the companycan compete with each other perfectly. There are two com mon characteristics that are con
12、sidered to be“competitive are:Lower prices : Gen erally, a perfectly competitive market exists whe n every participa nt is a "price taker"which means the suppliers will have not able to raise price for fac ing elastic dema nd curves, and no participa nt in flue nces the price of the produc
13、t it buys or sells.().So simply raisi ng price will make a loss of dema nd and total reve nue. The cross-price elasticity of dema nd can reflect the customers ' attitude towards someparticular goods. The dema nd of substitute goods is holdi ng pace with the price whe n it has any change. Convers
14、ely, the demandof complementary goods would decrease whe n the price in crease. In this con diti on, customers will always find the most proper goods for themselves.Low barriers to en try: Compared with oligopoly, the new firmswould be easier to en ter in the pure competitive market. And the entry o
15、f new participantswill probably provide competitionand en sure price is kept low in the long run.5.0 Explanation for Diagram in Pure Competitive MarketIt is known to all that each in dividual firm is con sidered as a price taker. Customers maynot prefer to buy a product with a higher price.of puread
16、va ntageBecause of the characteristic (perfectknowledge)competitive market, neither buyers nor sellers can gain anand firm may sell their goods at the point where they have the maximized profit.From the short run view of a firm in a pure competitive market structure, the expla nati on of the diagram
17、 is as follow:The price in a pure competitive market structure is decided by dema nd and supply, which can be see n in panel on the right. When dema nd rises from D1 to D2, the equilibrium pointgoes fromA toB andP2 is the establishedprice.Becauseofthepricewhicha firm use staysat P2,margi nalrevenue
18、isequalto P2 at last averagereve nueisequaltoP2 aswell.WhenMC=MR, profitmaximizati onisachievedJso thepoi ntwhichfirms willstopproduc ingshouldbeC whichordi nate isP2 and abscissais Q2.Accord ingtothe diagramabove,when quantityisQ2, ATCisequaltoP1. So P2subtractP1 is averageprofitandthe n multiplyby
19、Q2 can obtain totalprofit.6.0 Roles of Profit in Market EconomyDema nd for factor resourcesScarce factor resources to flow where the expected rate of retur n orprofit is highest. I n the mobile phone market, whe n Richard Bransonstarted to get profit in 2002, VMhas 1,445,492 customers, which means s
20、tron ger dema nds, more labour and capital are committed. With morescarce factor resources, VM may able to earn more profit. However,in a recessi on, the output, i ncomes and inv estme nt for VM must all fall, which may cause the profit loss. Thus the compa ny should take acti on (for example cutt i
21、ng costs) to preserve its market positi on. Market En tryIf an in dividual compa ny gets more profit tha n others, it must be a sig nal to other producers within a market that profitable entry may possible. After three-year efforts, Richard Branson madeVMprofiting. Wherit comes, manyother firms woul
22、d be attracted to enter the industry. Thus, thecompetiti onwould be in creasedand new products,tech no logies would be also updated in a higher speed.7.0 The other two alter natives to profit maximizati onSatisfici ng behaviourSatisfic ing behaviour can be the substitute to profit maximizatio nbehav
23、iour. This behavioural method lays stress on how decisi ons aretaken within the firm. Whena decision is making, satisficingexplainsthat individuals and groups should choose the firstoption that is goodeno ugh to address most n eeds rather all. Based on Herbert Sim on' s work concerning behaviour
24、 - “ people possess limitedcognitive ability andcan exercise only bounded rationality ' when making decision i n complex, uncertainsituations , satisficing behaviour encouragesin dividuals and groups to atta in a more realistic goal.If VMset a goal that expending their customers to 2 millionin a
25、 year,fin ally it reaches millio n. Thus wise we can take the goal for a receivable.Sales reve nue maximizati onThe goal of sales revenue maximization is to maximize the sales other tha n profits. The man agers decisi on price and strategy of products.In this pattern of man ageme nt, bus in ess can
26、grow or susta in market share, en sure survival, discourage competitors, achieve bonu ses and build the prestige of the senior man ageme nt.For the VM, when it initially entered the mobile phone market, it isa great approach that sellingtheir products as many as possible withthe lowest profit to enl
27、 arge their market share.8.0 In flue nces on a Firm in the Short RunFrom the diagram above, which can be see n are total cost (TC) is thesum of fixed (TFC) and variable costs (TFC).I n the beg inning, whe nnothing is being produced ,the fixed costs will be equal to the total cost. The TC and TVCincr
28、ease concurrently with the quantity, but they are paralleled and the distance between them is TFC which is always inv ariable. And total cost is an upward trend.The diagram is about the short run cost curves. One time the fixed cost is excessively used, which will lead to the progressive decrease of
29、marginal product, meanwhile the marginal product reduce will lead to the decrease of marginal revenue. Leading the reducing of the ATCwhenMC<ATC,on the opposite,itwillleadto theATC's in creas ing.Making the short-r unATC curvelooklikeU-shaped, on the other side,the law of dimi nishi ngreturnswillleadto the rise of marginalcost of product ionas outputin creases.WhenAVC increasinghighertha n the fallin AFCone timetheoutput in creases ,which themargi nalcost isris ingwilllead to the averagetotalcostrising9.0 References