Module Overview
Mostly consumers benefit from competition through greater choices and lower prices. However, not all markets are equally competitive.
Consider the airline industry. Would prices of commercial aircraft-and eventually the cost of travel-come down if six or ten international companies competed for the business instead of just two? Perhaps. However, would it make sense for the new companies to enter the market?
Probably not unless the government subsidized the effort.
Understanding the marketplace in which your business operates will help you maximize the probability of earning profit for your business. In this module, you will learn some basic principles of estimating the market and generating profit.
Module Readings
Complete the following readings early in the module:
Module overview
From your course textbook, Managerial economics: Economic tools for today's decision makers, read the following chapters:
Pricing and Output Decisions: Perfect Competition and Monopoly
Pricing and Output Decisions: Monopolistic Competition and Oligopoly
From the Argosy University online library resources, read:
Lawler, E. E., III, & Toole, E. (Eds.). America at work: Choices and challenges. Gordonsville, VA: Palgrave Macmillan.
Assignment: Discussion-Market Structures
Industries can be classified under different market structures and this classification strongly dictates decisions made by managers within the market.
For example, in an industry classified under perfect competition, or in a perfectly competitive market, many competitors offer the same product and entry into the industry is easy. In this market, the pressure to maintain the same prices as the competitors is high, which characterizes this market.
On the other extreme, some industries are classified as monopolies and some fall under monopolistic competition. In a monopoly, there is only one provider of a product or a service, which has an inelastic demand. In this case, there is little incentive for the monopoly to be efficient or price competitive.
In a monopolistically competitive market, there are many firms selling a product or service that is only slightly differentiated from one another, and in the long term, these firms start showing characteristics of a perfectly competitive market.
Tasks:
Find an article about an industry in the United States, such as the pharmaceutical industry. You can consult sources such as the Wall Street Journal, Financial Times,Bloomberg Markets, the Economist, US News and World Report, and other publications for your reference.
After reading the article, respond to the following:
Identify the market structure that best characterizes the industry described in the article.
Explain the factors you considered when identifying the market structure for this industry.
Analyze whether this industry will work better if it changes its market strategy and starts showing characteristics of another market structure.
Critically analyze the advantages and disadvantages of the market structures that you studied in the readings.
Submission Details:
Post your responses in a minimum of 500 words to this Discussion Area. Support your assumptions with reputable source material. While responding, focus on market structures for the selected industries as well as analyses of advantages and disadvantages of other market structures.
Write your initial response in 300-500 words.
Do the following when responding:
Read your answers.
Provide substantive comments by
contributing new, relevant information from course readings, Web sites, or other sources;
building on the remarks or questions; or
sharing practical examples of key concepts from your professional or personal experiences
Respond to feedback on your posting and provide feedback to their ideas.
Make sure your writing
is clear, concise, and organized;
demonstrates ethical scholarship in accurate representation and attribution of sources; and
displays accurate spelling, grammar, and punctuation.