Economics for Business: Market Structures in Australian Industry

This economics assignment analyzes various market structures, including perfect competition, monopoly, monopolistic competition, and oligopoly, using the Australian cafe coffee shop industry as a case study. It explores how firms operate within these structures, focusing on price determination, profit and loss scenarios in both the short and long run, and the conditions for market entry and exit. The assignment delves into the characteristics of each market type, examining factors such as the number of buyers and sellers, product differentiation, and barriers to entry. It also considers the potential for firms to earn economic profits or losses under different market conditions and the implications for industry efficiency. The assignment examines the specific conditions that define each market structure, including the role of branding, promotion, and the overall impact on efficiency within the industry. Diagrams and illustrations are used to support the analysis of economic concepts.

ECONOMICS FOR
BUSNIESS

Table of Contents
INTRODUCTION...........................................................................................................................5
Assignment 4...................................................................................................................................5
Question 1 Describe how an industry compares with different firms located in the perfectly
competitive market. Is Australian industry is perfectly competitive industry?..........................5
Question 2 Determination of price exists in the perfectly competitive market and also ascertain
quantities they sell.......................................................................................................................5
Question 3 Is it possible to earn profit or loss in short time period in perfectly competition
market. Explain diagrammatically...............................................................................................6
Question 4. Determine the possibility of firm to earn above normal profit in long term while
locating perfectly competitive market.........................................................................................7
Assignment 5...................................................................................................................................8
Question 1 Explain how current sector will compare with another industry in relation to
various conditions of existence of monopoly market. Is you industry a monopoly industry?....8
Question 2 How to determine price, quantity sold by firm in the monopoly market structure
and also consider the cases of a private monopoly and a regulated monopoly...........................8
Question 3 An entity operated their business in monopoly market can earn super normal profit
or not. ..........................................................................................................................................9
Question 4 Can monopoly industry make an economic profit or economic loss in long run? . 10
ASSIGNMENT 6...........................................................................................................................10
Question 1 Describe conditions to know the market status of monopolistic market. Is your
industry a monopolistic competition industry?..........................................................................10
Question 2 How firm determine price to be charged for their product or sell specific quantity
in the monopolistic market. ......................................................................................................11
Question 3 Explain using diagrams how a firm will make effort in order to generate profit by
minimizing loss conditions in the same market. .......................................................................11
Question 4 Long run profit generation by firm in the monopolistic market..............................12
Question 5 Conditions to be satisfied by firm in order to maintain their existence as oligopoly
market player.............................................................................................................................13
Question 6 How oligopoly market players determine their price to attract customers and also
determine quantity number to sell.............................................................................................14
Question 7 Reasons behind earning higher profit in the current market..................................14
Question 8 Explain the factors behind earning higher amount of profit in the long run...........15
Question 9 Should a firm in your industry spend money on promotion, branding and/or
image? Why, or why not?..........................................................................................................15

Question 10 ...............................................................................................................................15
Discuss efficiency in your industry. Is this the best outcome for efficiency? Why or why not?
...................................................................................................................................................15
Are there any benefits in your industry that compensate for a loss of efficiency, is there is any
in your industry..........................................................................................................................16
If there is no loss of efficiency in your industry, discuss very briefly why all other market
structures cannot be like your industry......................................................................................16
Conclusion.....................................................................................................................................16

Illustration Index
Illustration 1: economic profit or economic loss in short run in perfect competition......................6
Illustration 2: Profit or loss in long run in Perfect competition.......................................................7
Illustration 3: Super normal profit or economic loss in short run monopoly market......................9
Illustration 4: Profit or loss situation in long run under monopoly market..................................10
Illustration 5: Above normal profit or economic loss in long run monopolistic market...............13

INTRODUCTION
Economics plays a major role in an entity as it helps in knowing market position of firm
in order to extend current share in the market. Cafe coffee shop in Australia has been selected for
this project. This project is about the explanation of different market such as, perfect
competition, monopoly, monopolistic and oligopoly markets. This project describes the impact
on the firm exist in Australian industry. Furthermore, this describe price determination and the
variable conditions of the markets.
ASSIGNMENT 4
Question 1 Describe how an industry compares with different firms located in the perfectly
competitive market. Is Australian industry is perfectly competitive industry?
Perfectly competitive market is where large number of buyers and sellers or
homogeneous product is available and also no boundation for entry & exists in this market. It
provides the perfect information about the price of these differentiated products, there are many
conditions which satisfy the wants of perfectly competitive market, are as follows:
 There must be large number of buyers and seller.
 No barrier for entry and exist in these markets.
 Homogeneous products must be requires in fulfilling the conditions of this market.
 Information about the price of each and every product is access by buyer & sellers.
Cafe coffee shops in Australian industry does not satisfy all these conditions of perfectly
competitive market, as it falls in another market.
Question 2 Determination of price exists in the perfectly competitive market and also ascertyain
quantities they sell.
In perfectly competitive market large number of buyers & sellers are available with
undifferentiated product so the price of these products is same. These prices are determines as
per the demand & supply of the products in the market. Such as, if more demand and supply less
than price of the products is high and if demand is less or supply is high than price of the product
is low. In this market demand & supply of the products are intersect each other in this market.
For example, in agriculture market lot of buyers and sellers are available & produced same
vegetables and fruits by numerous farmers. But the price of these fruits and vegetables are same.

Information of these fruits and vegetables are easily accessed by the buyers & sellers. This is
perfectly competitive market.
Question 3 Is it possible to earn profit or loss in short time period in perfectly competition
market. Explain diagrammatically.
Yes, it is possible in short run of perfectly competitive market to generate an economic
profit by analysis the price & output for the industry. To earn economic profit every industry has
to satisfying several conditions given below:
 An industry can earn higher profit when the average revenue curve and marginal revenue
curve were equal otherwise, industry can suffers losses.
 Marginal cost curve firstly decreasing at diminishing rate thereafter, they increases at
increasing rate.
 Average revenue curve also firstly decreases thereafter continuously increases.
 When marginal cost curve cuts the straight line of price than it indicates the break even
point and determines the prices as per quantity.
After following these rules in short run, an industry cannot suffers losses, they always
earns profit.
Illustration 1: economic profit or
economic loss in short run in perfect
competition

Question 4. Determine the possibility of firm to earn above normal profit in long term while
locating perfectly competitive market.
In the perfectly competitive market economic profits of the industry are always zero in
long run because there are continuously new firms enters in the existing market so the supply
curve shifts towards right and the prices & profits fallen. It can be easily understandable by using
this diagram, which are as follows:
Ill
ustration 2: Profit or loss in long run in Perfect competition
According to this diagram, the supply curve is shift in left, due to continuously enters the
new firm in the market so the price of the commodity will increases. Due to this demand curve is
also shifted towards left and the profit of the firm is fallen or they suffers losses. So in perfectly
competitive market firms cannot make profits in long run.

ASSIGNMENT 5
Question 1 Explain how current sector will compare with another industry in relation to various
conditions of existence of monopoly market. Is you industry a monopoly industry?
A market where only single seller and large number of buyers and sellers sales a unique
product in this market and enjoy the benefit of the price set by them, are called monopoly
market. There are many conditions which states the market are monopoly are as follows:
 Only single seller and large number of buyer in this market.
 If no barrier of entry & exit in the market than market are monopoly.
 Must be no substitute of these products in this market.
 Firm influences the price of the product.
 Must be downward sloping demand curve in this market so the firm can enjoy the benefit
of the price.
Australian cafe coffee shops are the monopoly market. Due to different kind of unique
product and influence the price of this product, they come in this market.
Question 2 How to determine price, quantity sold by firm in the monopoly market structure and
also consider the cases of a private monopoly and a regulated monopoly.
In these markets, Prices of the product are to be set by the monopoly industries because
there are only one seller who produces the product and large number of buyers. The prices of this
product are wholly depends upon the combination of production supply and quantity demanded.
When marginal cost is equal to the marginal revenue curve, then this is the equilibrium level of
output and price is to be determining as per the above marginal cost. In short run monopoly
market set their price as per the variable cost and in long run price is to be determine as per the
fixed and variable cost.
Question 3 An entity operated their business in monopoly market can earn super normal profit or
not.

In short run under monopoly market industries can earn economic profit only when the
average total cost, marginal cost are in U shaped curve and marginal revenue and demand have
downward sloping straight line than industries earns profits otherwise, they go on losses. Prices
are to be determine when demand line cuts the price so the price is fixed as per the products, due
to these industries can earn the profits in short run.
Illustration 3: Super normal profit or
economic loss in short run monopoly market

Question 4 Can monopoly industry make an economic profit or economic loss in long run?
In long run of monopoly market firms can achieve the profit when their average cost
curve is U shaped and marginal cost curve is firstly downward sloping than increases in the
increasing intend. Marginal revenue and the demand are straight line on downward sloping. At
the point where average cost curve cuts the marginal revenue, then it denote the price as per the
quantity of the products of consumers. If the prices are good than definitely in long run of
monopoly market achieves higher amount of profits otherwise, they suffer losses. Mostly, in long
run of monopoly market firms can earn profits.
ASSIGNMENT 6
Question 1 Describe conditions to know the market status of monopolistic market. Is your
industry a monopolistic competition industry?
Monopolistic market is that market where many firms who produces many products or
services to large number of buyers. Firm comes under these categories by satisfying some
conditions, which are as follows:
Illustration 4: Profit or loss situation in long run under
monopoly market

There are many sellers who sales differentiated products and large number of buyers of the
products and services are comes under this category.
 No barrier for entry and exit of the firm.
 Products are not similar under these market..
 Buyers and seller does not have perfect knowledge about the market.
 Market demand of the products and services is more variable, many times firms have to
reduce their price to increases the demand of the product.
 Cost of the product and services are high, due to more advertisement cost is automatically
increases.
Australian cafe coffee shops are not fulfilling these conditions so there is not
monopolistic market. Because there are barriers on entry and exit in the market and also the
market demand of product and services are not variable. To conclude Australian cafe coffee
shops are not monopolistic market.
Question 2 How firm determine price to be charged for their product or sell specific quantity in
the monopolistic market.
Under monopolistic market, a large number of seller sales their differentiated product and
every seller have an option to charge the price of their products as per the demand and supply in
the market. Price under this market is majorly affected by the average revenue curve and average
cost curve. If average revenue curve slopes downwards than it will result in increase and
decrease in the prices of the product. Monopolistic market is at their equilibrium point when the
marginal revenue curve is equal to the marginal cost curve. In long run under monopolistic
market average revenue curve falling, average cost curve is U shaped and marginal cost curve
intersect the average cost curve at its minimum point, this will result for the break even point and
prices are to be determines as per the break even point.
Question 3 Explain using diagrams how a firm will make effort in order to generate profit by
minimizing loss conditions in the same market.
In the short run market of monopolistic competition, profit & loss is purely depended on
the average total cost of the firm. It means if average total cost curve is less from the market
price than organization surely earns economic profits and if not than they will suffers losses and

their must requires marginal revenue curve equals to marginal average cost curve for getting the
economic profit. It can be easily under stable by using the diagram, which are as follows:
Here, marginal revenue(MR) is equals to marginal cost(MC) and average total cost(ATC)
is also less than the market price than this leads to the economic profit in short run under
monopolistic market. Formula for getting the economic profit in short run market is (price-
average total cost)*quantity.
Question 4 Long run profit generation by firm in the monopolistic market
In monopolistic market, economic profit can earn by producing the good at that point
where marginal revenues curve is equals to marginal cost curve. Suppliers can earn higher profit
by increasing the cost of their products, this will reflect the quantity demand of the product but
increase the profits. But more entry & exit of the firm in long run monopolistic market will result

the economic profit is zero. Diagram shows the upward & downward of the demand or price for
the profit for the organization in long run are as follows:
This diagram shows that the average revenue and marginal revenue is continuously
decreases and average cost curve and marginal cost curve is like U shaped curved. This shows
that the high level of profit due to high price and low sales is an inefficient, this will no leads the
profits in long run and low price and high output is efficient but due to this organization suffers
losses. So it shows that the zero profit in long run of monopolistic.
Question 5 Conditions to be satisfied by firm in order to maintain their existence as oligopoly
market player.
Oligopoly market are those market where only few sellers producing the products and
retain large number of market share. There are many conditions which determines the market are
oligopoly, those are as follows:
Illustration 5: Above normal profit or economic loss in
long run monopolistic market

 few form or single firm have large majority of market shares.
 Actions or policies of one firm must influence or impact on others.
 There is high barriers of entry in this market.
 Produces differentiated or homogeneous products.
 Dominate in nature means firm must controlled over the production and supply of the
products.
 Large scale of competition.
 Prices may down to zero profits.
Thus, Australian cafe coffee shops are not satisfied these conditions so there has no
oligopoly market. They have only single seller or large number of buyer. Due to this there has no
competitions.
Question 6 How oligopoly market players determine their price to attract customers and also
determine quantity number to sell.
In oligopoly market, there are only few firms but they affect the business of each others.
They decide the prices as per the division of market and after assigning the quota and also tries to
differentiate their products to fixing the prices. Firms try to make their price low for building the
goodwill and make higher profit by increasing the sales. They follow the policies that if they fix
their price low from others than they may earn abnormal profits. Furthermore, fixing the price is
also depends upon the selling of products which may be identical or homogeneous, and as per
the powerful influence on the market. According to this market, sellers can increase or decrease
the prices without any fears of losing the customer in the market. As per the demand and supply
of the products, sellers can fluctuate the prices.
Question 7 Reasons behind earning higher profit in the current market
As per the short run of oligopoly market sellers may have hard to earn profit because
there is huge competition due to the homogeneous products. Profit is depended on the products if
they are differentiated or the product price are low as compare to the price of its substitute
products. Furthermore, there is a high barrier on the entry in this market. For earning the profit in
this market seller must have to build the goodwill so that the customers purchases the goods &

services and firm earns profit. But many times in oligopoly market firms has not earned any
amount of profit they suffer only losses.
Question 8 Explain the factors behind earning higher amount of profit in the long run.
According to the long run oligopoly market, firm can earn higher amount of profit
because they have enough time to build the goodwill in the market and due to this goodwill they
can earn more amount of money. Furthermore, if they produce differentiate products than they
will achieve higher economic profit and if they produce homogeneous product than they earn
less economic profit. There are more chances of achieving higher profits in long run as compare
to the short run.
Question 9 Should a firm in your industry spend money on promotion, branding and/or image?
Why, or why not?
Australian cafe coffee shops are the monopoly market. In monopoly market only single
seller produce the goods and services to the large number of buyers. As per the Australian coffee
shops, they do not need to spend money on their products promotions, branding or for images.
Because in monopoly there is no competition, so they can charge prices as they want. Due to
monopoly market customers have to purchases the product from them as on the basis of their
requirements and their need from these sellers. So the customers of Australian cafe coffee shops
have to be purchase products from them. Because of restriction in the entry and exit in this
market, they do not need to spend extra money on the promotions of their product. So Australian
cafe coffee shops are not pay any amount of money on to their promotions and for building the
images or goodwill.
Question 10
Discuss efficiency in your industry. Is this the best outcome for efficiency? Why or why not?
Australian cafe coffee shops have major efficiency in the taste, quality and customer
satisfaction. This efficiency provides the best outcome for the industry. Because if the taste and
quality of the products are good than more customers will attract from this and the firm will earn
more profits and satisfaction.

Are there any benefits in your industry that compensate for a loss of efficiency, is there is any in
your industry.
Australian cafe coffee shops have very slow service but it can not reduce their image or
goodwill, because their taste and quality of foods or beverages is too good. So every customer
does not complaint of this and wait for their services. This is the benefit of our industry to
compensate for loss of efficiency.
If there is no loss of efficiency in your industry, discuss very briefly why all other market
structures cannot be like your industry.
Australian cafe coffee shops are more efficient as per their taste and preferences or as per
their customer satisfaction. Other market industry does not satisfy the customers as per the
Australian cafe coffee shops. So due to the lack this efficiency other market industries does not
build the structure like this.
CONCLUSION
It can be concluded from the above report that Australian cafe coffee shops exist in
monopoly market. The cafe coffee shops provide higher valuable services to gain higher level of
customer satisfaction by providing the taste and quality in their products. Moreover, Australian
cafe coffee shops take advantage from their efficiency so that they can compensate the
inefficiency of their services. From the above discussion monopoly market is the best market in
terms of generating economic profit in both short run and long run.