Giray, Angelica T.

BECECO
BSBA-FM III Mr. Carpio
Assignment # 1

PURE COMPETITION

A market structure in which a very large number of firms sells a standardized

product, into which entry is very easy, in which the individual seller has no control over
the product price, and in which there is no non-price competition; a market
characterized by a very large number of buyers and sellers. Market prices are
determined by consumer demand; no supplier has any influence over the market price,
and thus, the suppliers are often referred to as price takers. The primary reason why
there are many firms is because there is a low barrier of entry into the business. The best
examples of a purely competitive market are agricultural products, such as corn, wheat,
and soybeans.
Giray, Angelica T. BECECO
BSBA-FM III Mr. Carpio
Assignment # 2

PURE MONOPOLY

The market structure in which one firm sells a unique product, into which entry
is blocked, in which the singe firm has considerable control over produce price, and in
which non-price competition may or may not be found. A pure monopoly has pricing
power within the market. There is only one supplier who has significant market power
and determines the price of its product. A pure monopoly faces little competition
because of high barriers to entry, such as high initial costs, or because the company has
acquired significant market influence through network effects, such as Facebook, for
instance.

One of the best examples of a pure monopoly is the production of operating

systems by Microsoft. Because many computer users have standardized on software
products that are compatible with Microsoft's Windows operating system, most of the
market is effectively locked in, because the cost of using a different operating system,
both in terms of acquiring new software that will be compatible with the new operating
system and because the learning curve for new software is steep, people are willing to
pay Microsoft's high prices for Windows.
Giray, Angelica T. BECECO
BSBA-FM III Mr. Carpio
Assignment # 3

MONOPOLISTIC COMPETITION

A market structure in which many firms sell a differentiated product, into which
entry is relatively easy, in which the firm has some control over its product price, and in
which there is considerable non-price competition. Monopolistic competition is much
like pure competition in that there are many suppliers and the barriers to entry are low.
However, the suppliers try to achieve some price advantages by differentiating their
products from other similar products. Most consumer goods, such as health and beauty
aids, fall into this category. Suppliers try to differentiate their product as being better so
that they can justify higher prices or to increase market share. Monopolistic competition
is only possible, however, when the differentiation is significant or if the suppliers are
able to convince consumers that they are significant by using advertising or other
methods that would convince consumers of a product's superiority. For instance,
suppliers of toothpaste may try to convince the public that their product makes teeth
whiter or helps to prevent cavities or periodontal disease.
Giray, Angelica T. BECECO
BSBA-FM III Mr. Carpio
Assignment # 4

OLIGOPOLY

A market structure in which a few firms sell either a standardized or

differentiated product, into which entry is difficult, in which the firm has limited
control over product price because of mutual interdependence (Except when there is
collusion among firms), and in which there is typically non-price competition.
An oligopoly is a market dominated by a few suppliers. Although supply and demand
influences all markets, prices and output by an oligopoly are also based on strategic
decisions: the expected response of other members of the oligopoly to changes in price
and output by any 1 member. A high barrier to entry limits the number of suppliers that
can compete in the market, so the oligopolistic firms have considerable influence over
the market price of their product. However, they must always consider the actions of
the other firms in the market when changing prices, because they are certain to respond
in a way to neutralize any changes so that they can maintain their market share. Auto
manufacturers are a good example of an oligopoly, because the fixed costs of
automobile manufacturing are very high, thus limiting the number of firms that can
enter into the market.
Giray, Angelica T. BECECO
BSBA-FM III Mr. Carpio
Seatwork # 1

LAW OF DIMINISHING RETURN

The law of diminishing returns is an economic principle stating that as investment in a

particular area increases, the rate of profit from that investment, after a certain point,
cannot continue to increase if other variables remain at a constant. As investment
continues past that point, the return diminishes progressively.

The law of diminishing returns also referred to as the law of diminishing marginal
returns, states that in a production process, as one input variable is increased, there will
be a point at which the marginal per unit output will start to decrease, holding all other
factors constant. In other words, keeping all other factors constant, the additional
output gained by another one unit increase of the input variable will eventually be
smaller than the additional output gained by the previous increase in input variable. At
that point, the diminishing marginal returns take effect.

For example, the law of diminishing returns states that in a production process, adding
more workers might initially increase output and eventually create the optimal output
per worker. After that optimal point, however, the efficiency of each worker decreases
because other factors -- such as the production technique or the available resources --
remain the same (this is known, more specifically, as the law of diminishing marginal
returns). This kind of problem might be addressed by modernizing the production
technique using technology.
Giray, Angelica T. BECECO
BSBA-FM III Mr. Carpio
Seatwork # 2

BREAK EVEN ANALYSIS

Break-even analysis entails the calculation and examination of the margin of

safety for an entity based on the revenues collected and associated costs. Analyzing
different price levels relating to various levels of demand, an entity uses break-even
analysis to determine what level of sales are needed to cover total fixed costs. A
demand-side analysis would give a seller greater insight regarding selling capabilities.

The break-even analysis table calculates a break-even point based on fixed costs,
variable costs per unit of sales, and revenue per unit of sales.

Break-even analysis is useful in the determination of the level of production or in

a targeted desired sales mix. The analysis is for management’s use only as the metric
and calculations are often not required to be disclosed to external sources such as
investors, regulators or financial institutions. Break-even analysis looks at the level of
fixed costs relative to the profit earned by each additional unit produced and sold. In
general, a company with lower fixed costs will have a lower break-even point of sale.
For example, a company with $0 of fixed costs will automatically have broken even
upon the sale of the first product assuming variable costs do not exceed sales revenue.
However, the accumulation of variable costs will limit the leverage of the company as
these expenses are incurred for each item sold.