Week Three Learning Team Reflection

Week Three Reflections

The key objectives for this week’s assignment were determining the following: pricing strategy to meet organizations goals, ways to create non-price barriers to entry and to increase product differentiation based on market structure, and ways to reduce costs. The different market structures are pure competition, monopoly, monopolistic competition, and oligopoly. The team struggled a little bit in differentiating between the different market structures. Through team and class discussions, which provided numerous examples, the team was later able to see the distinct differences between the market structures and the price/non-pricing strategies each uses.

Pure competition “involves a very large number of firms producing a standardized product” (McConnell, Brue, & Flynn, 2009). A purely competitive market has no control over price. They need to ensure price is equal to marginal revenue and average revenue in order to maximize profit as illustrated by table 1 below:

Short-run profit maximization for a purely competitive firm.

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Note: Retrieved from McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009), p.184.

At the other extreme is a pure monopoly. Pure monopoly exists when there is one supplier or products and services, and there are not substitutes. “Given identical costs, a purely monopolistic industry will charge a higher price, produce a smaller output, and allocate economic resources less efficiently than a purely competitive industry” (McConnell, Brue, & Flynn, 2009). Examples of such industries are gas and cable companies. These companies remain successful because there are barriers of entries such as monies’ of scale, patents and licenses, and ownership of essential resources and actions to keep the competition out.

Monopolistic industries are considered to be price makers because the demand curve is down slopping and its marginal revenue curve lies below the demand curve, as seen in the graph below. Such companies can increase...