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Production, Costs, and Profits Essay

Economic costs are the total of opportunity costs and accounting costs. Unlike accounting costs, economic costs involve opportunity costs. As a rule, economic costs are sacrifices involved in performing an activity or following a decision or course of action. The firm can perform successfully, even when the economy is in decline because firms operate in their specific segment and they may keep growing and prospering even in the time of economic recession. As companies hold their unique position in the market the general economic trends may influence their position but economic trends do not always determine the position of companies in the market. For instance, companies operating in the premium segment of a market can count on stable revenues, even in the time of economic crisis. In such a situation, companies can benefit even when there is a loss in economic costs because the company still has the possibility to choose the alternative that can bring benefits to the company. Even if the chosen alternative cannot bring maximum profits, still this alternative can be beneficial for the company.

The article of Vargas dedicated to maquiladoras reveals the fact that the production of maquiladoras located in Mexico mainly contributes to the outsourcing of the supply of maquiladoras to the US companies. At this point, it is worth mentioning the fact that that maquiladoras contribute to the development of business in the US and, thus, stimulate the growth of the US economy. American companies can receive cheap maquiladoras from Mexico and create new products, which are more competitive compared to products imported from other countries. In addition, the quality of new products is high. Therefore, the supply of maquiladoras from Mexico to the US stimulates the economic growth in Texas and other regions of the US, where maquiladoras are used by local companies.

The perfectly competitive company is the company that operates in the highly competitive market, where not a single company holds the dominant position. In fact, the perfectly competitive firm is equal among equals. At any rate, the company is in the equal position compared to its rivals and is comparable in size, market share and assets to its major rivals. There are neither leaders nor outsiders in the industry. All firms are in the similar position in the market.

The profit of the monopoly and the perfectly competitive firm differ in a long-run perspective. Basically, the profit of the monopoly is likely to decrease in a long run perspective, whereas the profit of the perfectly competitive firm is likely to increase because the monopoly has no rivals and the quality of its products is unimportant but the company cannot always forecast the market development and the demand existing in the market. As a result, the monopoly may face a risk of the overproduction that naturally decreases revenues and provokes problems with sales. In addition, the monopoly may develop complex bureaucratic structure that increases costs spent by the monopoly on its maintenance. In contrast, the perfectly competitive firm has to evolve and keep progressing to optimize its performance and structure to needs of consumers. Therefore, the perfectly competitive firm has to improve its performance and grow, while the monopoly has no room for growth as there are no rivals in the market.

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