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# Market Structures And Profit Maximization Essay.

8 Pages / 1,834 Words Published On: 02-11-2020

## Perfect Competition

1. Perfect Competition
It is claimed that the market for various stocks and shares represent Perfect Competition. Using the assumptions used to build the perfect competition model, justify the case that shareholders of BP represent a structure that is almost the same as perfect competition.

2. Perfect Competition
New Zealand egg market represents a perfectly competitive industry where almost all the firms are identical with identical cost structures. The industry consists of many thousands of small farms and a representative firm’s total cost is given by the equation TC = 100 + q2 + q where q is the quantity of output produced by the firm.
Eggs are sold in cartons of 125 one dozen boxes.
The market demand for eggs is given by the equation P = 1000 – 2Q where Q is the market quantity and the market supply is represented by the equation P = 100 + Q.

a. Formulate an equation to illustrate the New Zealand egg market and calculate the equilibrium quantity and price in this market.
b. Victor owns one of the egg farms in Tauranga. The firm’s MC equation is based upon its TC equation and MC = 2q + 1. Given this information and your answer in part (a), derive the firm’s profit maximizing level of production, total revenue, total cost and the profit
c. Evaluate your answer in (b) and justify whether it is short-run or long-run equilibrium. Appraise the firm’s situation in the long run
d. Predict the long-run equilibrium price and quantity that can be achieved for Victor’s egg farm. Support your answer using the theory of the firm. Assume quantity (q) is equal to 10 boxes and Average Total Cost
(ATC) = (100+q2+q)/q
e. Given the long-run equilibrium price you calculated in part (d), predict the number of egg boxes produced in this market?

3. Perfect Competition  (Shut down point)
a. Evaluate the factors that drive profits to zero in perfectly competitive markets and the incentives that drive the market to a long run equilibrium.
b. Analyze the following scenarios.
i. a firm choosing to operate at a loss in the short run.
ii. a firm deciding to shut down production in the short run.
c. Evaluate the perfectly competitive market, using a graph to illustrate the short run supply curve. Explain the relationship between the short run supply curve and the scenarios discussed in parts (bi)and (bii)?

4. Monopoly (Profit Maximization)
Ferry Services from Auckland to Waiheke Island in the Auckland Hauraki Gulf and the Waitemata harbour is operated by the Fullers Group of ferries. Since there are no competitors this is an example of a monopoly
Following information is provided about the cost structure of the firm
-The firm’s total cost is given by the equation TC = 100 + Q2 + Q (where Q is the quantity of output (number of trips) produced by the firm).
-The firm’s MC equation is based upon its TC equation is MC = 2Q + 1.
-Market demand for this product is given by the equation P = 1000 – 2Q (where Q is the market quantity).
a. Fullers Ferry Services is a single price monopoly,
i. construct the marginal revenue curve of the firm
ii. illustrate the profit maximizing quantity and price.
b. Using your answer in part (a) estimate the firm’s total revenue, total cost and profit at this profit maximizing price and quantity. Evaluate whether this is a short-run or long- run equilibrium.
c. Analyze the long run situation in this market

5. Monopolistic Competition (Profit Maximization)
a. Using Auckland City’s Café Market as an example, compare and contrast the characteristics of a monopolistically competitive market with that of perfect competition.
b. Demonstrate what happens to the equilibrium price and quantity in such a market if one firm introduces a new, improved product?
c. Justify the monopolistically competitive firm’s demand curve is flatter than the total market demand curve in a monopolistic competition market.
d. Some experts have argued that there are too many brands of breakfast cereal in the market and signals a situation of inefficiency. Discuss the validity of this statement

6. Oligopoly (Kinked Demand Curve)
a. Airline industry in New Zealand Provide a good example of an Oligopoly. Evaluate the specific characteristics of the oligopoly market and demonstrate the relevance of the ‘kinked demand curve’ principle in oligopoly markets
b. Distinguish and evaluate the reasons as to why the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? Examine the conditions that are necessary for successful cartelization and outline the organizational problems that have to be overcomebycartel?

Cite This Work

My Assignment Help. (2020). Market Structures And Profit Maximization Essay.. Retrieved from https://myassignmenthelp.com/free-samples/uuec5100-economics-for-decision-makers/the-perfect-competition-model-in-market.html.

My Assignment Help (2020) Market Structures And Profit Maximization Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/uuec5100-economics-for-decision-makers/the-perfect-competition-model-in-market.html
[Accessed 04 October 2023].

My Assignment Help. 'Market Structures And Profit Maximization Essay.' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/uuec5100-economics-for-decision-makers/the-perfect-competition-model-in-market.html> accessed 04 October 2023.

My Assignment Help. Market Structures And Profit Maximization Essay. [Internet]. My Assignment Help. 2020 [cited 04 October 2023]. Available from: https://myassignmenthelp.com/free-samples/uuec5100-economics-for-decision-makers/the-perfect-competition-model-in-market.html.

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