ECO550 Week 5 Discussion Question

Please respond to this additional discussion question as it relates to the original discussion board scenario.

Market structure depends upon the following four characteristics: number and size of firms in the industry, similarity of products sold by the firms, extent to which decision making is independent, and the conditions of entry and exit. The appropriate type of market structure for Katrina's Candies that would help with the international expansion would be monopolistic competition. The selection of this market structure should be as if it was the closest resemblance to the sugar-free chocolates offered by Katrina's Candies. In the chocolates and candies industry, there are a few dominate companies and many small ones like Katrina's. Also, these dominant firms like Nestle and Hershey's sell differentiated products that help in their dominance. Firms like Katrina's Candies can make their own independent decisions and are not confirmed by many rules. Lastly, there is an ease of entry and exit from the marketplace for the line of sugar-free chocolates and this is resembled by market testing to see the response of prospective consumers before fully launching the product. Profit maximization occurs when Katrina's Candies produces a level of output that charges a price in which marginal revenue equals marginal cost. Therefore, the two pricing and output strategies that Katrina's Candies need to use to maximize profits would be to do the correct analyses to ensure that quantity and price are at the limits where profits are being maximized through the differentiated product they offer in the marketplace. Also, Katrina's Candies needs to review the amount of expenses they spend on selling and promotional events as this places a role in maximizing profit by cutting the expenses here and using the optimal amount. Other than the two strategies suggested above, if Katrina's Candies wanted to view another worthwhile strategy, I would suggest that they have a firm grasp on their advertising expenditures to ensure they are not overspending in this category, which could drive down profits to a suboptimal point. How can you determine what are the different barriers for each market structure and how would they effect a potential company to enter the market