econ reviewer

• maximum profit - marginal revenue is equal to marginal cost
• profit - difference or gap between total revenues and total costs
• two components of total revenues

  • output produced
  • price of commodity
• level of output is based on the demand of product
• competitive market - has no market power; demand curve faced by a firm is a horizontal line; considered as the price taker
• monopolistic market - business firm has a huge market power; the downward sloping market demand curve is the demand curve faced by the firm
• market concentration - number of sellers and buyers
• two types of market concentration

  • monopolistic market
  • oligopolistic market
• monopolistic market - most concentrated with single seller determining the price that would maximize the profit of the business enterprise
• oligopolistic market - less market sellers but still with significant market power with few sellers colluding or forming a cartel to set price
• barriers to entry - prevent the entry of potential players and competitors
• two categories of market barriers

  • scale barriers
• two categories of market barriers

  • scale barriers
  • legal barriers
• product differentiation - create a market niche through several means of varying its products and services
• limited information - unevenness in the distribution of information
• porter's five forces of competitive positions

  • Michal Porter
  • alternative perspective on profitability analysis and on the attractiveness of an industry
  • stronger the forces, lower its profitability and less attractiveness
• competition among existing firms in the industry - competitive behavior of existing player
• monopolistic market - huge market power
• competitive market - very intense, business enterprise is weak, too many players
• oligopolistic market - depend on behavior and when cooperate like monopolist, the forces is migitated
• sellers - responding to the needs of customers
• bargaining power of customers - transactions are made between buyers and sellers
• monopsony - single buyer with huge bargaining power on seller
• bargaining power of suppliers - conversion of raw material to produce an output
• threats of potential entrants - realistic threat wherein scale and legal barriers may reduce this competitive force
• threats of substitute goods - high rate of profitability are the ones challenged by the emergence of substitute goods
• swot analysis - spin-off of the marginal benefits and marginal cost framework
• swot analysis - integration of the various perspective in identifying business opportunities
• strengths - contribute directly to profitability
• weaknesses - mitigate the profitability
• opportunities - positive impacts of various external environments to profitability
• threats - potentially impair profitability
• swot analysis and business climate

  • macroeconomic policies
  • government regulations
  • institutional support
• macroeconomic policies - course action on government meant to stabilize and promote growth
• government regulations - set of rules meant to address market distortions
• institutional support - host assistance from the government that can make favorable business climate