微观与宏观

Micro Theory and ApplicationAbstract:This essay will talk about the Virgin Mobile phone market’s structure and the structure’s characteristics, the price and output behaviour of diagram. The essay also analyse the roles of profit in the mobile phone market to attracting Richard Branson and the influences of the shape of the total cost, average cost and marginal cost.Key words: Perfect competition; Oligopoly; Cost; Profit.I. Oligopoly market and Perfect competition market structures’characteristics and diagram of two structures.1. The Virgin Mobile phone market is believed to be an oligopoly, only has a few sellers and each offering a similar or identical product to the others. Oligopoly also means that there are only a few sellers of a particular commodity, so the mobile phone market is easy to make huge profit. One characteristics of this market structure is can earn super normal profits in the long run, another characteristics is there are very few players in the market place, the Virgin Mobile is making profits though as a niche player after having been late in entering the mobile phone market.2. The diagram of oligopolistic market structure as the following figure shows:Price and output behavior under oligopolyPrice and output behavior under oligopoly:i).As above, price is OP and output is OQ. At price is higher than P demand is elastic, this means that reduce prices will increase the share of market .At prices lower than P however the fear is that cutting prices will force rivals to follow suit and there will be little gain in the way of additional sales.ii).Oligopolies therefore are not keen to indulge in severe price competition, because they fear they will reduce prices but their market share will remain much the same as before. So the oligopoly must rely upon other types of Non-price competition, such as advertising, loyalty schemes, free gifts, special offers, sales etc.3. The perfect competition is also called purity competition, is a market that doesn’t have any impede and disturb. One of characteristics of perfect competition is that a largenumber of buyers and sellers of the commodity, so that no one firm can affect the market price through its own action. Another characteristic of perfect competition is that buyers and sellers could entry and exit to the market free.4. The diagram of perfect competition market structure as the following figure shows:Average Revenue equal to Marginal Revenue equal to Price.No one gain an advantage and firms can sell their goods up to the point at which they have maximised their profit because of the characteristics of this form of market. In this market, firms are ‘Price Takers’because any change in output of one firm is too insignificant to affect the price.II. There are two roles would profit have played in attracting Richard Branson to the mobile telephone market.1. For the entrepreneur profit is an incentive to undertake a risk in the belief that a gain can be made. Therefore profit is the Reward to entrepreneurs and the incentive that encourages them to take risks.2. Profit is also a reward. It must be earned, as we have seen, generally in an imperfect competitive situation. Many businesses fail and for many different reasons. Large firms can survive even if not efficient because they have a very large share of their market. This may allow them to exploit customers to continue making profits.3. Profit divided into Normal profits and Supernormal profitsi). Normal profit is the minimum amount of profit, which is necessary to keep a firm in a industry.ii). Supernormal or abnormal profit is anything above that minimum amount of profit. III. Sales Revenue Maximisation Theory and Individual Motives will the alternatives to profit maximisation as a goal of the firm.In the summary of profit maximisation we suggested that many business people mayknow very little with regard to MC and MR.Indeed in many firms’ targets may be set for profits suggesting that they should be a particular percentage of Total Turnover. Turnover is equal to Total Sales multiplied by quantity of product sold. This is of course also Total Revenue. The managers and directors would then try to ensure that with a predicted level of sales they can control costs to meet the profit targets.1. This theory is propounded by Professor W J Boumal based on: ①Managers get better perks and salaries from sales than profit ②Market share is considered a better sign of progress of a firm e.g. Tesco versus other supermarkets.③Because of the above, heavy advertising will take place to maximise sales.④Profit may be reduced to pay for advertising. ⑤Firms will still make profits---to keep shareholders happy---and salaries and perks up --- but it will not be a Profit Maximisation Philosophy.⑥Firms which operate on this philosophy will attempt to sell more but at a lower price than a firm looking for maximum profit.2. Individual MotivesHuman beings are complex and may have conflicting motives, both as individuals and in combination as formal or informal groups.①One growing area in most countries is the environmental or ‘green’ aspect.②Boardroom battles are frequently identified in Financial Papers or Magazines.③They may end up in sackings, resignations or votes on issues, which may have considerable effect on how a firm operates.IV. Analyze Total Costs. Average cost and Marginal Cost1. Total Costs is the sum of Fixed and Variable costs. If nothing is being produced then Fixed Cost will be Total Cost.TC=FC+VC2.Average cost will vary with output because as production increases Fixed Cost will assume a smaller proportion of the cost of producing each unit.Average Total Cost (ATC) is the cost per unit of output, or average fixed cost (AFC) plus average variable cost (A VC). This can be written:ATC=AFC+A VC3.Marginal Cost (MC) is the cost of expanding output by one unit---At the Margin! Since fixed cost has no impact on marginal cost, it can be written as:4. Cost Curves for a FirmSTC(Q)=FC+VC(Q) As output increases average cost will fall because Fixed Cost will now be a smaller element of each unit.This means that every firm will want to reduce its Average Cost to the minimum point at which it is still making a profit.The diagram below shows the effect of Marginal Cost on Average Total Cost.The Marginal Cost curve always cuts the Average Cost curve at its lowest point.If MC is lower than ATC will be falling.When MC is greater than ATC it will drag it up.MC = A VC and ATC at minimum A VC and ATC。