Economics for Managerial Decision Making
Kerri Moran
University of Phoenix
Economics 561
September 16, 2008
Economics for Managerial Decision Making
Maximizing Profits in a Pure Monopoly
In 2005, while still in a pure monopoly market structure, Quasar reviewed production processes and determined that improvements were necessary to maximize profits and run production facilities efficiently. Two options were weighed to determine which process would be most appropriate. David Pinto, Vice President of Technology suggested that Quasar upgrade the production processes and set price to maximize profits. Jane Sarandon, Vice President of Finance is against a holistic approach and prefers to only target problem areas. The optimal choice is to follow David’s suggestions and reduce prices to $2,200. This will bring total profits to 2.21 billion, compared to the 1.52 billion that would be earned if Jane’s suggestions were followed. Even a producer in a pure monopoly market must improve inefficiencies, because they cannot be passed on to the consumer and expect to sell the same quantity (U of P, n.d.).
Oligopoly Market Structures & Pricing Strategies
Monopolistic Market Structure
Perfect Competition
Quasar has experienced the ups and downs associated with the lifecycle of a product from initial market entry through product maturity stage. The four market structures have proven it necessary to formulate the correct pricing strategies, and develop correct budgets toward associated costs. To maximize profits, re-strategizing becomes as essential. Marketing initiatives, branding and product differentiation are also essential to the product lifecycle and each market structure requires careful analysis of how to proceed effectively while utilizing financial resources efficiently. Quasar effectively managed the Neutron notebook from conception to maturity, while effectively branding the product and differentiating from the competition and finding new...