Suppose you ran a firm. Which type of market structure would you want your firm to operate in -- pure competi

Question

Suppose you ran a firm. Which type of market structure would you want your firm to operate in -- pure competition, monopoly, oligopoly, and monopolistic competition. Explain your rationale.

Answer 1

Monopoly.

Every for profit firm wants to monopolize their industry (assuming there were no anti-trust laws). The only factor that would effect your price is marginal cost and marginal revenue of demand. This would be the way to maximize economic profits, due to the fact that you have no real competition except people just doing without your service. Your pricing strategy becomes much simpler.

If your company is really interested in serving the community then you would still be able to give away all the producer surplus.

Monopolies are bad for consumers which is why the government steps in to break up trusts. They are really good for producers which is why businesses always are trying to do it. If businesses had no reason to monopolize there would be no anti trust laws.

Answer 2

I am sorry to say that this is a dumb question on a beautiful theory in Economics considering lot of factors. The idea of business is not to make profit alone but to serve a mission properly and target some income out of it. So, first of all you should have some form of goods manufacturing capability or service to offer to society. This preculudes you from choosing the type of firm theoretic structure to choose from, you don't get that option in responsible efficient freemarket environments. It depends on what your specialization is all about. Then hypothetically if some one wants an opinion then Monopoly is the right firm theoretic structure to operate in since you can control your price and your output according to your whims and fancies without anyone around to compete with you. You can also take undue amount of risk meaning financial structuring your firm since you are a monopoly and has a market that has no place to go other than get serviced by you. Olgiopoly requires lot of investment and high specialization. Monopolistic competition is bib corporations and you cannot invest as a sole invester other than through stocks. Pure competition is very risky prospect since entry and exit is very easy in it and there will be lot of competitors for you. So monopoly like Utility companies are the right prospects if you want to buy stocks in them because it is a riskless proposition. Usually a portfolio nuetralised to your risk preference is the best bet.