The structure of a market is defined by the number of firms in the market, the existence or otherwise of barriers to entry of new firms, and the interdependence among firms in determining pricing and output to maximize profits. The author of this paper will cover: the advantages and limitation of supply and demand identified in the simulation, the effectiveness of the organization in which the author knows, and how the organizations in each market structure maximizes profits.
The simulation looks at all four types of market structure within the East-West Transportation Company. The four divisions operate within each of the four market structures. The divisions are Consumer Goods, Coal, Chemical …show more content…
In the monopoly there are no price taker- a monopolist sets the price for the product or service to maximize profits. The profit-maximizing price and output is at the point where MC=MR. The output is less than what it is in the perfect competition. In the long run, it is possible for a monopolist to earn some economic profits, if to entry of new firms exist (University of Phoenix, 2008).
In the oligopoly there are few firms, pricing and output decisions are strategic; that is each firm considers the reaction of the other firms while taking any decision. The prices set by all