Reflection Case

Market economy is an economic system based on exclusive property and the market in which in principle, individuals decide how, what, and for whom to produce (Colander, 2010, pg.56). The market economy focus on self-interest for individuals and market forces focus on supply and demand (Colander, 2010). For example an individual purchase goods within his or her financial means. However, business price goods are based on the supply and demand on consumer interest and expecting a profit in return.

Team A discussed the perfectly competitive market and the six conditions that make up a perfect competitive market. According to Colander (2010) a perfectly competitive market is clear of the pressure from the economy, political and community forces. The first conditions are buyers and sellers are price takers. This means buyer and sellers accept the price is marked on the item. A second condition is the number of firms in larger, large firm's price on quantity of goods to maximize the firm's profits. Third conditions is no barriers to entry, this simply means social political, or economic impediments that prevent firms from entering a market (Colander, 2010). Fourth conditions are firms products are identical, it would be impossible to tell the difference between marginal cost and marginal revenue from other firms. Fifth condition is complete information, firms and consumers using the same technology to make effective choices and decision with product on the market. Consumers use the information to compare prices on products and firm use the technology to determine supply in demand on the market. Sixth condition is selling firms are profit-maximizing, entrepreneurial firms is setting goals in different ways (Colander, 2010).

Teams A discuss definition of a monopolist and the different units' monopolist use to make effective decision on pricing. Monopolist is firms using output decision affecting price and marginal revenue (Colander, 2010). Marginal revenue is defined as an adjustment in cash flow related with differences in quantity (Colander, 2010). Monopolist use different unit to determine prices on quantity of goods produce by the firm. The units are MR>MC is accumulations from profit by growth in output, MR<MC accumulations from profit by reducing output, and MC=MR build up profit (Colander, 2010, pg.344). In the end, marginal income will always be less than the price because of the boost in production (Colander, 2010).

The four attributes of monopolistic competition are many sellers, differentiated products, various dimensions of competition, and basic entry of new firms in the long run (Colander, 2010).