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The UPS Store Franchise Firm and Future Profits Essay

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Updated: Jun 13th, 2020

Indivisibility is a margin position, which allows any production manufacture to function (Besanko & Braeutigam 2010). When a company requires an appliance that produces 500 items installs an apparatus that produces 2000 pieces, it leads to an overproduction, because such an appliance cannot be divided into small ones. The device can become productive only by raising the level of production to 2000 items. Indivisible input is an increase in production that cannot be divided in order to manufacture fewer items (Mukherjee, Mukherjee, & Ghose 2004). The UPS franchise organization, as the most companies, has several indivisible inputs. Here are examples of indivisible input of the UPS firm: an industrial machine has to be fully equipped in order to supply an organization with copies of output; the vehicles used in the firm are designed for massive transportations.

There are four essential typical features of a perfectly compatible company: “a large number of small firms, identical products sold by all firms, perfect resource mobility or the freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology” (Perfect competition, 2005, para. 1). These four components combined indicate that a certain company that is considered to be perfectly competitive is not able to seize domination over the whole retail. A market that is perfectly competitive implies that the competition exists at the maximum achievable position. The economists of the neo-classic dispute over the possibility of a perfect competition to be able to create the most excellent effect on customers and society in general.

The excessive quantities of smaller companies that manufacture interchangeable output signify that an abundant quantity of flawless replacements can take a place of the production that is manufactured by any corporation. “This makes the demand curve for a perfectly competitive firm’s output perfectly elastic. Freedom of entry into and exit out of the industry means that capital and other resources are perfectly mobile and that it is not possible to erect barriers to entry” (Perfect Competition, 2005, para. 3). Impeccable awareness indicates that every company function on the same foundation; that consumers are aware of every attainable perfect alternative for a product and that companies indeed manufacture interchangeable items (Perfect Competition, 2015). The UPS franchise shares the trait of exact services provided by other companies, as there are different firms that render transport and logistics services. This confirms one of the basic traits of perfectly compatible company – “identical products sold by all firms” (Perfect Competition, 2005, para. 1).

An economic profit is a “difference between the revenue received from the sale of output and the opportunity cost of the inputs used” (Economic Profit, 2014, para. 1). Unlike in a monopoly or an oligopoly, a perfectly competitive company is not able to derive a monetary benefit eventually; in other words, a company is not able to obtain pecuniary profit that covers more than the company’s expenses.

Assuming that the UPS franchise firm is competitive, the profits would not inevitably disappear over time; more likely, the profit of the firm would gravitate towards normal profit (Profit, 2015). Due to frequent distorting of this hypothesis of a zero eventual profits, it has to be noted that in this context the concept of ‘profits’ is manipulated differently. The approach of neo-classics delineates profits as a monetary balance, which remained after taking away all expenses (Economic Profit, 2014). On the other hand, proponents of classical economics interpret profits as a remaining amount of funds after reimbursing expenses that do not include interest and risk coverage; thusly not taking into consideration a number of opportunity costs. So, to conclude, if the UPS franchise firm becomes compatible, the remaining economic profits after subtracting every expense would be minimal, as, according to the classic economy, the economic profits only cover the expenses of the firm and would lean towards normal profit on the long run.

References

Besanko, D., & Braeutigam R. (2010). Microeconomics. New York, New York: John Wiley & Sons.

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Mukherjee S., Mukherjee M., & Ghose, A. (2004). Microeconomics. Dehli, India: PHI Learning.

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IvyPanda. "The UPS Store Franchise Firm and Future Profits." June 13, 2020. https://ivypanda.com/essays/the-ups-store-franchise-firm-and-future-profits/.

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IvyPanda. 2020. "The UPS Store Franchise Firm and Future Profits." June 13, 2020. https://ivypanda.com/essays/the-ups-store-franchise-firm-and-future-profits/.

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IvyPanda. (2020) 'The UPS Store Franchise Firm and Future Profits'. 13 June.

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