Jessika Canales Díaz
Instructor: SR. Carlos Méndez David
Differentiating between Market Structures
In this simulation, the learner studies the cost and revenue curves in different market structures perfect competition, monopoly, monopolistic competition, or oligopoly faced by a freight transportation company, and makes decisions to maximize profits or to minimize losses. The simulation also deals with the concept of Prisoner’s Dilemma and the price war scenario in a duopoly. Road, railroad, air transport, and water transport are crucial to a country needs. Food farm products, consumer’s goods, raw materials for industry coal for electric lumber for constructions, …show more content…
The point where PAVC is therefore called the shutdown point, to minimize your losses, you should produce the output where P=MR=MC. At the given market price of $55 per hundred weight shipment, you are operating 6.75 million hundred weight shipments. Since P=MR=MC at this output, you have minimized losses at $150.03 million.
Your Coal Division has earned good profits. However, you could have made more profits by reducing price and increasing output. The fact that your Coal Division is a regional monopoly gives you a lot of control over the price and output of your service. Unlike in the case of perfect competition, a monopolist does not take the market price as given. Being the only seller, a monopolist can set the output and price of the product or service to maximize profit. However, as Tanya Roy pointed out, though a monopolist can control price and output, the law of demand holds in a monopoly too. At a high price, quantity demanded is low and profits need not be high. Thus, setting the highest possible price for your Coal Division’s output does not ensure maximum profits. Tanya Roy advised you to lower price and increase output to maximize profits. However, in this scenario, reducing the price to increase output will enable you to maximize revenue, and not profits. To maximize profits, it is better for you to increase the price of your service and reduce the output. For your Coal Division,