Dq Essay Example | Topics and Well Written Essays - 500 words

Dq - Essay Example r product differentiation) where the selling strategy is to distinguish their product from competing products or services on the basis of workmanship and design. In an oligopoly setting there a few sellers that sell a differentiated or standardized product where the decision of competitors affects the sale of a firm. Therefore, firms consider the strategies of competitors to determine its output and price (McConnell 2005 p.177). A start up company can expect profit when the business is able to cover the expenses including the start up costs. The sale of products should earn enough revenue to meet ongoing expenses associated with the operation of the business. A start up business entrepreneur must realize that a product sales amounting to $10,000 will not cover a monthly overhead expenses of $10,000 because the sales returns has a gross profit of only around $4000. A business reaches break even point when the sales revenue is equal to all business costs. The break even point can be calculated by identifying the fixed costs and variable costs. Fixed costs are expenses which do not change with changes in the volume of sales. For example, administrative salaries and rent remains the same and are expenses that must be met regularly irrespective of the volume of sales. These are usually known as overhead costs. Variable costs fluctuate with changes in the volume of sales. Variable expenses like shipping, purchasi ng inventory and manufacturing costs of a product has to be met for a start up company to make profit. Market structure and the distribution of income raise concerns about the formation of monopoly power where increased concentration of control moves into the hands of few monopolistic firms. Monopoly leads to decreased competition among firms and inefficient distribution of resources in the economy. Monopoly has an impact on the distribution of income. Research indicates that monopoly power reduces the income share of workers when compared to capitalists,