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1 year ago

Explain how firms that compete in the four different market structures determine profitability.

Business

1 answer:

WITCHER [35]1 year ago

4 0

The four different market structures determine profitability.

perfect competition, monopolistic competition, oligopoly, and monopoly.

Profitability is a measure of an organization's profit relative to its costs. A more efficient organization earns higher profit margins than an inefficient organization that must spend more to achieve the same profit.

Profitability is measured in terms of income and expenses. Income is the money generated by a company's activities. For example, if you produce and sell crops or livestock, income will be generated. However, the money that flows into the business, such as borrowing money, is not income.

The accounting definition of profitability is when a company's total revenue exceeds its total expenses. This number is called net income, or income minus expenses, according to Iowa State University. Revenue is the total income generated by the company.

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A car rental agency rents 220 cars per day at a rate of 28 dollars per day. For each 1 dollar increase in the daily rate, 6 fewe

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The cars should be rented at $34 per day for a maximum income of $6268 per day.

If the daily rental is increased by $x

Rental: R(x)=(28+x)dollars per car-day

Number of cars rented:

N(x) = (220−6x) and Income: I(x) = (28+x) (220−6x) = 6,610 + 52x−5 $x^{2}$ dollars/day.

The maximum will be achieved when the derivative of I (x) is zero.

$\frac{dI(x)}{dx}$ = 52−10x = 0

⇒ x = 5.2

For an even dollar rental amount, and increase of $5/day or $6/day will generate the same income.

$28+$5 = $33/day

$28+$6 = $34/day

would both be valid answers.

However, $34/day involves renting fewer cars and thus reduced expenses.

Using basic substitution and arithmetic

I(4) = $6,268

<h3>What is Maximum revenue ?</h3>

Maximum revenue is defined as the total maximum amount of revenue of product or service can yield at maximum demand and price.

To calculate maximum revenue, determine the revenue function and then find its maximum value. Write a formula where p equals price and q equals demand, in the number of units.

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