The Average Level Of Profit Essay

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The average level of profit per annum is approximately $5.02 billion USD. As shown by the table above, the average revenue, $39 256.20, is significantly greater than the average total costs,34 289.20. Although we cannot ascertain what the level of normal profit for General Motors truly is, considering the revenue earned is approximately $5 billion greater than the total costs, General Motors is clearly charging significantly more for vehicles than just the price that covers costs. Thus there is a presence of abnormal profits proving that the firm is operating in an oligopolistic market. Additionally, the firm 's ability to charge a significantly greater price for each unit sold, shows its 'price making ' behavior in the industry. Often firms will drive down prices to intentionally ensure new entrants in the market cannot sustain this loss of revenue. However the fact that there has not been any significant price reductions in the past years of operation proves that the threat of competition is not enough to force prices down towards normal profit levels and there are thus high barriers to entry.

3. Non-Price Competition

As previously discussed, prices in the automotive industry tend to stick at their current set price and only increase or decrease within a small range. Since firms in an oligopoly do not compete by adjusting the price of their products, they compete using non-price related methods.

To begin, one way in which General Motors broadens its consumer base is
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