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1、The Micro Theory and Application in Virgin Mobile Summary: The thesis is contact the micro theory to analysis the Virgin Mobile company. In the thesis, the mainly theory including: Short run costs, the characteristics and diagram of oligopoly, the characteristics and diagram of perfect competition,
2、alternatives to profit maximization( Williamsons theory and Growth Maximization Theory), and the two roles of profit maximization. From these parts, we will have a deeply understanding about Virgin Mobile company.Key words: Oligopoly, Perfectly competition, Profit maximization, Short run cost As the
3、 social developed, the mobile phone market has a large developed. Due to the mobile phone market need is high technology, only a few company account for a large share of the market, so these companies has a very strong monopoly power in this market. Products of these enterprises are equal quality, b
4、ut the same products in their price is not same. With the fierce price competitiveness created by this sticky-upward demand curve, firms use non-price competition in order to accrue greater revenue and market share. Oligopoly means that there are only a few sellers of a particular commodity. In the
5、oligopoly the price are unlike to change very often, and there are obvious barriers to entry, which is a small number of business to occupy most of the necessary conditions for market share. The following is the behavior of price and output views:In DG, the demand is elastic that all the firms will
6、remain unchanged the prices. In DG, the demand is inelastic that all the firms will cut the price to gain the more profits, it will leading to a price war. So the point G is the equilibrium point that is the best option for the oligopolies market. At this time, the price is OP and the output is OQ.T
7、here is another market structurePerfect Competition. There has some characteristics of this market. In Perfect Competition market, a large number of buyers and sellers of the commodity, so that no one firm can affect the market price through its own action. The other is freedom of entry and exit to
8、the market for buyers and sellers. This is probably the most important condition for the theory of Perfect Competition. The following is the behavior of price and output views:From the diagram, we can note that the premise is that AR=MR=Price. Because of the characteristics of this from of market no
9、 one can gain an advantage and firms can sell their goods up to the point at which they have maximized their profit. In this market firms are Price Takers because any change in output of one firm is too insignificant to affect the price. When the marginal costs meet marginal revenue, they generate t
10、he most profit.Profit is the reward to entrepreneurs and the incentive that encourages them to take risks. Profit is also a reward. It must be earned, as we have seen, generally in an imperfect competitive situation. Profit can also be termed Normal or Supernormal. Normal profit is the minimum amoun
11、t of profit, which is necessary to keep a firm in an industry. Supernormal profit is anything above that minimum amount of profit. Normal profit is the average rate of reward per until of output prevailing for the average entrepreneur over an economy as a whole. The following diagram shows the norma
12、l relationship between revenue cost and profit and output.Maximum profit occurs at point Q2 where gap between total cost and revenue is greatest. Total revenue highest point occurs at Q1 and after this point declines because the total cost starts to rise quickly as output increase.An alternative way
13、 of showing what effect might be of maximizing profits of revenue would be to use the marginal and revenue diagram already shown. This would look like this:When output is Q1, price is P1, this is where marginal cost equals marginal revenue (MC=MR), the profit maximum. When output is Q2, price is P2,
14、 where marginal revenue equal zero (MR=0), the revenue maximum.For many company that profit maximisation is not always the main goal. They may want to achieve the profit maximisation, at the same time achieve individual motives. There will analysis two other alternatives to profit maximisation as a
15、goal of the firm: Sales Revenue Maximisation Theory and Growth Maximisation Theory. Sales Revenue Maximisation Theory was propounded by Professor W J Boumal based on the following: Managers get better perks and salaries from sales than profit. Market share is considered a better sign of progress of
16、a firm. Because of the above, heavy advertising will take place to maximize sales. Profit may be reduced to pay for advertising. Firms will still make profitsto keep shareholders happyand salaries and perks upbut it will not be a Profit Maximisation Philosophy. Firms which operate on this philosophy will attempt to sell more but at a lower price than a firm looking for maximum profit. The anther is Growth Maximisation Theory, it propounded by Robin
