Quasar Computers and Different Market Structures
Quasar Computers and Different Market Structures
ECO/561
July 22, 2012
Quasar Computers and Market Structures There are four types of market structures in the economic marketplace; monopoly, oligopoly, monopolistic competition and pure competition (McConnell, Brue, and Flynne (2009). The Market Structure simulation (University of Phoenix, 2012) presented a case of Quasar Computers and the business decisions that the company faced in each of these business structures. This paper presents a summary of the results and impacts of those business decisions.
Monopoly
In 2003, Quasar monopolized the market with the creation of an all-optical computer known as Neutron. Patents promote innovation for inventors, which allow exclusive rights to do business for a specific duration (McConnell, Brue, & Flynn 2009). A patent for this new technology allowed Quasar to experience growth in revenues by setting the price as the only provider of an all-optical computer. Quasar established that marginal cost and marginal revenue were equal when selling each Neutron computer at $2,550 with quantities sold was at 5.4 units. This helped Quasar determine the need for maximizing future profits to stay competitive with cost reductions in production. Oligopoly
In 2006, Quasar was in an oligopolistic market because they were already competing with Orion Technologies, a company that recently introduced their own optical notebook computers. During this time of competition, Quasar and Orion mutually stabilized the price for notebooks and both were generating profits. As Orion Technology introduced their optical computer to market which resulted in a 50% consumption, Quasar decided that the price of the computer would drop to $1850, creating a profit of $207 and revenues equally $1195 million. Although Orion did make a dent in the optical computer industry they were not able to capitalize on the market. Despite the fact that they were holding the other
ECO/561
July 22, 2012
Quasar Computers and Market Structures There are four types of market structures in the economic marketplace; monopoly, oligopoly, monopolistic competition and pure competition (McConnell, Brue, and Flynne (2009). The Market Structure simulation (University of Phoenix, 2012) presented a case of Quasar Computers and the business decisions that the company faced in each of these business structures. This paper presents a summary of the results and impacts of those business decisions.
Monopoly
In 2003, Quasar monopolized the market with the creation of an all-optical computer known as Neutron. Patents promote innovation for inventors, which allow exclusive rights to do business for a specific duration (McConnell, Brue, & Flynn 2009). A patent for this new technology allowed Quasar to experience growth in revenues by setting the price as the only provider of an all-optical computer. Quasar established that marginal cost and marginal revenue were equal when selling each Neutron computer at $2,550 with quantities sold was at 5.4 units. This helped Quasar determine the need for maximizing future profits to stay competitive with cost reductions in production. Oligopoly
In 2006, Quasar was in an oligopolistic market because they were already competing with Orion Technologies, a company that recently introduced their own optical notebook computers. During this time of competition, Quasar and Orion mutually stabilized the price for notebooks and both were generating profits. As Orion Technology introduced their optical computer to market which resulted in a 50% consumption, Quasar decided that the price of the computer would drop to $1850, creating a profit of $207 and revenues equally $1195 million. Although Orion did make a dent in the optical computer industry they were not able to capitalize on the market. Despite the fact that they were holding the other
References: Fischer, M., Volckner F., & Sattler H. (2010). How Important Are Brands? A Cross- Category, Cross-Country Study. Journal of Marketing Research, 47(5), 823-839. Retrieved from https://ehis.ebscohost.com McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems and policies (18th ed.). Boston, MA: McGraw-Hill. University of Phoenix (2012). Economics for Managerial decision making: Market structure (video simulation). Retrieved from http://ecampus.phoenix.edu