What type of market is best for profit?(Perfectly Competitive Markets,Oligopoly, or Monoplies)?

Answer 1

The above answers are not correct.

Economic theory states that firms operating in markets other than perfectly-competive markets will be able to price their products above marginal cost. BUT, this does not mean they will earn economic profits. Indeed, an oligopoly, or a monopoly will need to spend money to protect their markets. Theory suggests that these firms will be willing to spend up to the amount of their excess profits, which means that economic profits will be driven to zero!

This would be true, even if the law protected these firms. The firms would lobby politicians, which costs money. This is just another mechanism to drive economic profits to zero.

Answer 2

So many answers here, what to make of them?

First of all, you can have profits in all of them, even economic profits (the difference being all the opportunity costs) in the short run. In the short run, a firm can have some advantage over the rest and make a bit of profit. Because it is the short run, new firms cannot enter.

But the question does not ask, 'Which markets must have profits' (to which the answer is none), but rather which is 'best' for profits.

Certainly reducing the competition will increase your profits, all else equal, monopoly, where there are no competitors, will be more profitable. Note the profit rate may be the same, but profits will likely be larger.

Now, it is important to point out profitable conditions still have to exist: you have to have a downward sloping demand curve. The quantity where marginal revenue=marginal cost must not be zero and the price has to be less than infinity (this might be the case where costs sky rocket because an increase in quantity). Someone said 'you cannot be sure', but I think if we make these common sense assumptions you can say that nearly always monopoly will give you more profits than oligopoly.

Someone brought up the point that the monopolist would have to spend money to defend his monopoly, and although this may be true in real life, it is not necessarily true here. But it is still an interesting point.

Someone brought up monopolistic competition, but monopolistic competition would have more firms than Oligopoly, and if stick to the definitions above, it is liley profit will be greater for the Oligopolist and Monopolist.

Answer 3

monopoly, of course..it means you're probably the only one on the market that offers a certain product or service. That makes you the king, the ONLY one that sets the rules on that market (kind of like the Mafia:) . You have no competition so you can increase prices, lower the quality...do anyhting! So being a monopoly is good for YOUR profit....but BAD for consumers, since they're forced to accept your behaviour (assuming they really have no other choice and they really, really need your product).

That's why there are laws in this country to protect consumers from monopolies (well, you could still argue some companies in some industries act like monopolies even now).

Answer 4

For starters, you missed an option: there is also monopolistic competition...

But to answer your question, it doesn't really matter. There are things other than industry structure that can contribute to or detract from profitability. A market can evolve into perfect competition, oligopoly, or monopoly depending on supply conditions, while high profitability usually occurs because of favorable DEMAND conditions.

Answer 5

Monopolistic competition.

Answer 6

Each of them have their moment of being needed to help stabilize a developing economy. As society stabilizes more and more the need for overwhelmingly powerful methods of economic control to provide that stability factor give way to more liberal and open free play to the consumptive needs of society.

Answer 7

Monopoly if it is natural is the correct answer
If not natural then you can not answer the question.