Cost and Revenue Curves
This week I took the Market Structure Simulation for Quasar Computers. This simulation allowed me to analyze the four types of market structure. This includes monopoly, oligopoly, monopolistic competition, and perfect competition.
In 2003, Quasar Computers started as a monopoly branding their product Neutron. Neutron was the first optical computer. The product was five times as fast as other computers because of the processor and high speed optical conductors. Executives at Quasar Computers had to determine a cost consumers would buy in. In 2004, they had to determine what amount should be spent on advertising. Increasing advertising costs and keeping the price where marginal revenue = marginal costs worked well causing an increase in sales and large profits.
In 2006, Neutron’s patent expired. Orion Technologies has entered a similar product into the market. Quasar Computers is experiencing an oligopoly. The goal is to keep prices low and successfully advertise the product.
In 2010, optical notebooks are at the mid-point of the product life cycle moving into a monopolistic competition. Customers are using them for business and personal use. Now there are multiple companies offering the product the focus should be increasing demand while keeping expenses low. Less money should be spent on advertising.
In 2013, optical notebooks have matured and profit margins have stabilized moving into a perfect competition. Quasar Computers has now acquired stake in one of the supplier for Optical Display Screens (ODS), Opticom. The goal is to make this a profitable venture and cost-reduction is key. As discussed above competition will eventually arise.
During this 10 year run Quasar Computers has moved through the four levels of market structures. They have been careful in their decision-making process determining pricing, advertising, and production. They must move into the future with new innovations and ideas....