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1、Table of Contents1.0Introduction12.0Oligopoly1lEntry barriers1lNon-price competition13.0Explanation for Diagram in Oligopoly24.0Pure Competitive Market3lLower prices3lLow barriers to entry35.0Explanation for Diagram in Pure Competitive Market36.0Roles of Profit in Market Economy4lDemand for factor r
2、esources4lMarket Entry57.0The other two alternatives to profit maximization5lSatisficing behaviour5lSales revenue maximization58.0Influences on a Firm in the Short Run69.0References771.0 IntroductionMarco and Micro economic knowledge we had learned in this period is mainly to discuss about some majo
3、r market structures in the entire market now. And they are oligopoly, monopoly and pure competitive market and so on. In this case, the Virgin Mobile had entered in mobile phone market in the UK, which is an oligopoly market. In this market, Orange, Vodafone, BT Cellnet and One2One are the oligopoli
4、sts. 2.0 OligopolyWhen a market or industry is dominated by a small number of sellers, we usually believe an oligopoly appears. And there are two main features of oligopoly:l Entry barriers: Its a great block for the new company to be a long-run part of an oligopoly market. Usually, many smaller fir
5、ms operate on the periphery on such s market, which means these companies cannot reach the supernormal profits or affect much to market prices and output. Take Virgin Mobile (VM) as an example: Before VM engaged in the mobile phone market in the UK, there were some industrial giants conquered the ma
6、rket- Orange, Vodafone, BT Cellnet and One2One, which account for a large market share. Although VM is making profit, the money it earned is far less than any one of these oligopolist.l Non-price competition: As a few company be dominant to an industrial, pricing can be no longer an effective compet
7、itiveness for those oligopolistic firms. Compared with pricing, after-sales service, extension of new market and advertising seem to be more emphasized by them. In this case, the VM is better to promote the competitiveness in such ways - improving the after-sales quality, expanding into new markets
8、, building their own brand and so on.3.0 Explanation for Diagram in OligopolyIn the oligopolistic market, the oligopolists may react diversely to the different price variation trend of their rivals. If one oligopolist raises the price and other companies will not follow it to maintain the market sha
9、re, however, if the company reduce the price and other companies must follow, which is to keep more market shares. It can be seen in the kinked demand curve below. PriceOutputQ2qQQQQQARMRQ1MC3MC2MC1GFP2P1Before the price is higher than P1, the product demand is elastic that means the price raises an
10、d the total revenue will reduce. But when the price is lower than P1, the product demand is inelastic - the price reduces and the total revenue will also do. Thus, the company may able to reach a stable profit-maximizing equilibrium at the point G, so the companies in the oligopolistic market can no
11、t change the price optionally.4.0 Pure Competitive MarketIn the pure competitive market structure, the company can compete with each other perfectly. There are two common characteristics that are considered to be “competitive” are:l Lower prices: Generally, a perfectly competitive market exists when
12、 every participant is a price takerwhich means the suppliers will have not able to raise price for facing elastic demand curves, and no participant influences the price of the product it buys or sells. ( http:/en.wikipedia.org/wiki/Perfect_competition#Basic_structural_characteristics ) . So simply r
13、aising price will make a loss of demand and total revenue. The cross-price elasticity of demand can reflect the customers attitude towards some particular goods. The demand of substitute goods is holding pace with the price when it has any change. Conversely, the demand of complementary goods would
14、decrease when the price increase. In this condition, customers will always find the most proper goods for themselves.l Low barriers to entry: Compared with oligopoly, the new firms would be easier to enter in the pure competitive market. And the entry of new participants will probably provide compet
15、ition and ensure price is kept low in the long run. 5.0 Explanation for Diagram in Pure Competitive MarketIt is known to all that each individual firm is considered as a price taker. Customers may not prefer to buy a product with a higher price. Because of the characteristic (perfect knowledge) of p
16、ure competitive market, neither buyers nor sellers can gain an advantage and 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 explanation of the diagram is as follow:Theprice in a pure competitive market structure isdecidedb
