Consider the market structure of the firm that employs you or a firm in your sta
ID: 1230324 • Letter: C
Question
Consider the market structure of the firm that employs you or a firm in your state.a. Why is it important for a profit maximizing firm to consider market structure in determining the price and output of its product or service?
b. How do you determine the profit maximizing level of production in terms of price, marginal revenue and marginal cost for the firm you are considering?
c. Has the industry your workplace ever shifted market structures? Discuss. If you do not work at a private-sector firm, then you could discuss a workplace you are familiar with.
Explanation / Answer
a. Why is it important for a profit maximizing firm to consider market structure in determining the price and output of its product or service? The structure of the firm will inform the seller what the equilibrium price and quantity will be. b. How do you determine the profit maximizing level of production in terms of price, marginal revenue and marginal cost for the firm you are considering? In this case, price and quantity is decided by setting S=D and solving for your unknown variables. MC is simply taking the derivative or total cost (MC+VC). MR is taking the derivative of total revenue (P*Q). c. Has the industry your workplace ever shifted market structures? Discuss. If you do not work at a private-sector firm, then you could discuss a workplace you are familiar with. My firm produces prescription drugs. When they first manufacture a drug, they are a monopoly because they have a government regulated patent. They earn economic profit. This send a signal to the market and when the patent is up, more firms entered the market and the industry is now a perfectly competitive market. Hope this helps