Market Structures Essay Example for Free

Market Structures EssayAccording to McConnell and Brue (2004), a monopoly occurs when a single hard is the sole manufacturer of a product for which no close substitutes exist. Since the United States postal Service (USPS, 2008) has no close substitutes, contender does not exist. The Postal Services common do obligation (USO) is broadly outlined in multiple statutes and encompasses multiple dimensions geographic scope, range of products, access to services and facilities, delivery frequency, affordcapable and uniform equipment casualty, service quality, and security of the mail (USPS 2008). When monopolizers are not protected by law from opposition, the companies may have to keep their prices low in order to keep competition from entering the grocery. However, USPS is considered a pure monopoly and barriers of entry are in place. USPS is the only federal operating system that sends and delivers mail. USPS has competition in the market with services much(prenominal) as pa ckage delivery. Now, the agency has to compete with major companies such as UPS and FedEx. United States Postal Services depends on operation funding from postage and fees.Comparatively, the Postal Service provides a higher level of service and does so at low, affordable prices (USPS, 2008). The University of Phoenix (UOP) is an institution for profit and it operates in a market social structure with pure competition. According to McConnell and Brue (2004), pure competition involves a very large number of firms producing a standardized product (that is, a product identical to that of other(a)wise producers, such as corn or cucumbers). New firms can enter or exit the industry very easily, (University of Phoenix, 2004).There are many universities, colleges, confederacy colleges, and vocational schools for students to choose from. They offer education in the U. S. and all overseas. Different educational institutions offer programs that are identical or similar to UOP. However, the tuition is not the analogous for all schools. UOP does not have a perfect substitute because of the many campus locations and varied degree programs. UOP does not have a significant control over the price of education. It can not change the market price it can only adjust to it. University of Phoenix participates in Federal Student Aid chip in and bring programs with attractive terms.All students seeking federal financial aid benefits must be admitted to a financial aid eligible degree or certificate program in order to determine financial aid eligibility. In order to be eligible for tuition deferment under the pecuniary Aid Plan, at least 50% of students annual tuition must be funded through the federal financial aid benefits and at that place are extremely strict policies that the UOP must adhere to in order to be eligible for Title IV. University of Phoenix observes the federal regulations regarding student loan requirements, including pricing and non-pricing strategies.The Arizona Student Loan Code of Conduct is designed to create and ensure uniform student loan practices that focus on the best quest of borrowers. In the Arizona Student Loan Code of Conduct, restrictions are defined to manage the relationships among school employees, learning institutions, lender advisory board members, and student loan organizations. In education, universities can freely enter and existing firms can freely leave purely competitive industries. According to McConnell and Brue (2004), a few industries more than nearly approximate pure competition than any other market structure.In particular, we can learn much about markets for agricultural goods, fish products, foreign exchange, elementary metals, and stock shares by studying the pure-competition model. Also, pure competition is a meaningful starting point for any discussion of price and output determination. Moreover, the operation of a purely competitive economy provides a standard, or norm, for evaluating the cleverness of the real-world economy, (University of Phoenix, 2004). Nike is an example of a monopolistic competition. This type of market structure has many sellers. Each firm in this market sells only a small share of the industrys output.The key to this is product differentiation. While there are many firms exchange similar products, its the price and quality differentiation that makes the consumer choose integrity product over another. (Forgang Einolf, 2006) These markets are extremely competitive and each manufacturer tries to solicitation to the consumer on a different level of expert service or material. (University of Phoenix, 2004). The Nike swoosh has certainly become a brand mark that consumers are automatic to pay a higher price for, however, Nike must also consider the current economy and the value offered for that higher price.Their products must truly be make with superior quality and materials. Nike must walk a fine line with their pricing strategy. Too high a price will cause the consumer to favor for a less expensive brand and withal low a price will not offset the superior manufacturing or costs paid to athletes to endorse or assist with design on the product. Therefore, Nike continuously battles between a relative price for the average consumer and making an acceptable profit. Also, Nike must eternally put a new, trendy product on the market.Styles must change frequently and certain quantities of the product must be produced without saturating the market with similar products. The deferral Nike has chosen is to eliminate certain styles within a time frame therefore, causing the consumer to upgrade to the newest, latest, styles. The J. C. Penny Company, commonly known as Pennies, is an American discussion section store aligned with the practice of oligopoly. The characteristics of oligopoly have commercialisedized groups entwined in price collusion while refusing to compete on the basis of price.It was noted by McConnell and Br ue that commercial groups share of the total market is typically determined through product development and advertisement, (University of Phoenix, 2004). In short, oligopoly happens when a certain market is belied by small commercial groups. In most cases, there are two or more commercial groups controlling the market. Pennies is a retail store that carries a wide trueness of health and beauty products, fine jewelry, electronics, clothing for infants, teenagers, men and women, and home decor.In most cases, oligopolies would neutralise using price sawed-offting methods. Oligopolistic commercial groups are highlighted by the existence of several commercial groups having significant portions of the market. Those commercial groups buy into calculated behavior and they have a hard time existing without each other. Consequently, the actions of one commercial group can be directly affected by the moves of rival groups and the products they produce may virtually be nearly uniform or mean ingful. Another example of an oligopoly (overt) is the OPEC cartel.According to Kaplan (1999), an oligopoly is an industry that is dominated by a few firms that display highly coordinated behavior and examples of oligopoly include the auto and cover industries. Concerning the oil industry, the oil cartel OPEC (Organization of the Petroleum Exporting Countries) is a pure example of an oligopoly. OPEC is the alliance of thirteen countries that have significant influence on the price of international oil and creating a balance between oil supply and demand (Iran, 2008). Generally, oligopolies operate in collusion or employ price leadership.OPEC relies on these secret agreements (collusion) to govern oil in the international market. Additionally, these countries can unify and offer prices in response to changes in costs or demands, making other firms react quickly (Kaplan, 1999). It is not uncommon to see several gas stations on the same block with identical prices even though they sh ow up to be in a very competitive environment. If one stations cuts the price per gallon, the others must quickly follow of they will rapidly lose market share as consumers switch to the lower priced station (Kaplan, 1999).This uniformity still does not have the power to ignore consumer taste. When examining the dynamic history between OPEC and consumers, it is clarify that there is a cause-and-effect for OPECs decision. For example, OPEC has famously used oil as a leverage tool to importer nations. In 1973, OPEC and a supplementary organization dogged to place an embargo on oil and subsequently raised the price of crude oil. However, Western nations transitioned creatively as they found new oil markets in other countries. Thus, the price hike did not have much bearing on the Western nations. The monopolist seeks maximum total profit, not maximum price. The monopolist shuns higher price because they yield a smaller-than-maximum total profit. Some high prices that could be charge w ould reduce total sales and total revenue too severely to offset any decrease in total cost (McConnell Brue, 2004). Moreover, OPEC miscalculated production and consumer demand for oil, which resulted in too much oil production in the world market. Thus, prices began to decline due to surplus while OPEC lost much revenue and division because of competing opinions on oil prices and arguments about oil production.Recently, the 9/11 attacks and the Iraqi invasion prompted world oil prices to rise higher than OPEC quotas, which severely repaired the purchase price to Western consumers. Yet, automobile firms began vehicles with alternative fuel options, hybridization models, and decreasing the retail prices of vehicles during the economic recession. Additionally, many consumers have reacted to price hikes by using public transportation, carpooling, purchasing hybrid or alternative fuel vehicles, and/or moving closer to the city. Lastly, Western importer nations are discovering new oil markets separate from OPEC.Still, collusion allows OPEC to reach agreements to fix prices, divide up the market, and otherwise restrict competition amongst themselves. By controlling price through collusion, oligopolists may be able to reduce uncertainty, increase profits, and perhaps even prohibit the entry of new rivals (McConnell Brue, 2004). In respect to todays global economic condition, a recession can severely disable a cartels ability to manipulate output and increase profits. Long-lasting recession usually serves as an enemy of collusion because slumping markets increase average total cost.Firms find that they have substantial waste production capacity, sales are down, unit costs are up, and profits are being squeezed. Under such conditions, businesses may feel they can avoid serious profit reductions by cutting price and thus gaining sales at the expense of rivals (McConnell Brue, 2004). As recently as November 2008, OPEC is considering reducing oil output. and if crud e prices continue to fall, then an additional OPEC cut may be needed. The producer group agreed to cut output from November 1 by 1. jillion barrels per day (bpd) after oil prices dived from a July record of $147 a barrel to less than that. Venezuela said on Tuesday it will propose another cut of 1 million bpd at the cartels next meeting (Iran, 2008). Thus, investor concerns over further declines in crude oil demand under the impact of the global financial crisis have kept pressing recent oil prices lower (Iran, 2008). With the drop in gas prices, consumers are able to purchase more gas based on oil price reduction, income, and inelasticity of gas as a resource.In the Market Structures Simulation, Quasar starts as a leader in the industry with its technology. Quasar has the monopoly on the market at the start of the scenario. After the initial surge of manufacturing and selling the products, Quasar realizes it must invest in advertisement and upgrades to production to keep the edge . Orion begins to produce a similar product at a lower price. Quasar must understand that stabilizing the price at this time will create an oligopoly market structure and stabilize the industry.As Quasar adjusts its price accordingly, profits stay steady and Quasar is able to invest in its own branding and innovation once again. As time goes on, we see Quasar move to a perfect competition where muniment is reduced, manufacturing processes are improved, and prices are stable. At this point, Quasar needs to maintain its market share by staying on top while continuing to increase the efficiency of its processes to maximize profits.