A perfectly competitive market has many buyers and sellers. Many buyers and sellers in the market mean that the decision of an individual buyer or seller does not have significant effect on the markets performance. In perfect competition, buyers and sellers also have perfect knowledge of the prevailing market conditions. Also, the products in a perfectly competitive market are homogenous thus; buyers are indifferent to the products (Case, Fair & Oster, 2014).
A value-menu fast food restaurant tends to exhibit the characteristics of a perfectly competitive market structure because it exists in a business in which there are many fast food restaurants, which provide the same value-menu option. Also there are many buyers who buy from these fast food restaurants. Fast food restaurant owners as well as consumers are aware of these value-menu food items and the prices at which they retail. Also, the customers buy them from the fast food restaurants as long as they are retailing at the market price. In addition, the value-menu food items are available in every fast food restaurant. Hence, the consumers are indifferent to them.
A firm that exists in a perfectly competitive market has to operate at the least cost and attract as many customers as possible. To maximize short-run profits, I would integrate a cost leadership strategy in the firm. The strategy will aim at eliminating unnecessary costs while maximizing all the available resources. Eliminating unnecessary costs will aid in reducing the total cost (Mirkin & Xu, 2016). Maximum use of the available resources will ensure self-sustainability. Second, to attract as many buyers as possible, I would integrate a product differentiation strategy. This strategy will aim at providing options of the same product to the consumers. Selling different varieties of the same product is likely to increase the total sales as compared to selling the product in one form.
Firms in a perfectly competitively will opt to remain open on Mondays to avoid losing revenue to each other. If one firm chooses to close on Mondays, its decision will not have any significant impact on the market outcome. This means that while one firm is closed, the other firms in the market will have more customers and therefore more revenue. To avoid losing revenue to other firms, each firm in a perfectly competitive market will opt to remain open on Mondays.
The long-run benefits of running a firm in perfect competition is the potential for growth, and increased market share. When one runs a firm in perfect competition appropriately, the firms sales are likely to increase in the long run. Continued increase in sales during this period leads to the overall growth of the firm. Growth in operations and revenue will lead to expansion. Eventually, the firm will become a major player in the market (Case, Fair & Oster, 2014).
My value-menu fast food restaurant would be open on Mondays as long as all other value-menu fast food restaurants are also open. Also, as long as the restaurants profits increase in the long-run, the restaurant would also be open on Mondays. However, the restaurant would not be open on Mondays if the other restaurants were closed. Also, if the restaurants profits reduce in the long-run while the costs increase, the restaurant would also be closed. Losing money on Mondays is a good business decision if the profits increase in the long run (Mirkin & Xu, 2016).
If my restaurant operated in a monopolistic competition, I would assess the price ranges being charged by the other few restaurants and apply them if they would be suitable for my restaurant. In an oligopoly, I would charge the same prices being charged by the other few restaurants. In a monopoly, I would choose to charge the price, which will suit my restaurant. In a monopolistic competition, oligopoly, or monopoly, my profits would be higher compared to a perfect competition. However, my customers would be better off in a perfect competition than in an oligopoly, monopoly, or monopolistic competition.
Case, K. E., Fair, R. C., & Oster, S. (2014). Principles of economics. Pearson Higher Ed.Mirkin, K., & Xu, Y. (2016). Search with Private Information: Sorting, Price Formation and Convergence to Perfect Competition.
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