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Forms of Industrial Organization

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Forms of Industrial Organization

Forms of Industrial Organization
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Introduction Society has a limited amount of land, labor, and capital out of which to make things. Consequently, society must be very attentive when figuring out how to best convert its limited resources into the goods and services that people mostly desire. Firms may or may not face a lot of competition from other firms. At one extreme lies monopoly, in which a firm faces no competition because it is the only firm in its industry. At the other extreme lies what economists call perfect competition, a situation in which a firm competes against many other firms in an industry in which they all produce an identical good. Between the extremes lie two situations: oligopoly, where there are two or more firms in an industry; and imperfect (monopolistic) competition, in which there are many competitors, but each produces a slightly unique good.
Market Simulation Market structure is not a concept that is stable. In fact, it is not uncommon for a firm to have more than one market structure over time. It is interesting to examine how the dynamics of market structure evolve by adding competition. The market simulation showed a great example of market structure evolution. In the simulation Quasar entered the computer market with cutting edge technology making it a monopoly. Team B then recognized that investing in advertising was profitable for Quasar only if it reduced the price of its computers. In this market there are no changes in the suppliers and we saw an increase in consumers after investing in advertising. The dynamics of the market changed when Orion technologies entered the market, making it an Oligopoly taking over 50% of the market. As a result of the entering competition Quasar had to find a perfect price to offset the competition from Orion technologies.…...

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