...Differences in the Market Structures In economics there are four main market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. Each of these market structures faces the common factor of competition. Various degrees of competition are what separate these market structures. Secondly, the commodity or product plays a huge role in these market structures because some products have substitutes or identical products. Lastly, we will observe the barriers to which a firms face when entering or exiting the market. This is a very important factor in the market structures because relative difficulty in entry and exit of the markets will determine what type of market structure we are examining. Market structures are based on two extremes known as perfect competition and monopoly. Oligopolies lie in the middle of this spectrum. A comparison and contrast of each market structure in short term and long term scenarios will be detailed in the following paper. Perfect competition and Monopoly In a Perfect competition there are four conditions that characterize the perfect competition structure: a large number of buyers & sellers, free entry & exit, product homogeneity, and perfect information. Each of these aspects is compared when examining the differences between monopoly and perfect competition. First in perfect competition there are a large number of small firms. Perfectly competitive firms’ demand curves are perfectly elastic while a monopoly’s...
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...four market structures—pure or perfect competition; monopoly, monopolistic competition, and oligopoly—and the implications of the market structures for competitive strategies and profit maximization. You will participate in discussions that compare various market structures and their characteristics, evaluate the effectiveness of competitive strategies in market structures, and determine profit-maximizing strategies based on a market structure analysis. The topics incorporate Week One material related to market outcomes and prices & Week Two concepts, which focused on productivity and costs. This week includes activities that lead you to identify the market structure firms compete in and the factors that lead to these determinations. They also allow you to evaluate the effect of market structure on profit maximization in the short and long run. You will learn how to use graphs and charts of profit maximization in each structure. You learn how the market structure positively and negatively affects a firm and how the effectiveness of the competitive strategies in the structure affects the organization’s long-term profitability. Critical to this understanding is the fundamental concept that a firm maximizes profits where marginal revenues equal marginal costs. The ability to focus on the marketplace, an organization’s cost structure, and market structure on competitive strategies and profit maximization will emphasize the importance of economics in decision-making. Market Structure ...
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...MARKET STRUCTURE IN BANGLADESH QUESTION Question 3 (44 marks) Please note that this question requires substantial research Part A – (8 marks) Explain monopoly and monopolistic competition market structures, and identify the key factors that distinguish them Part B – (18 marks) Choose two different industries from your home country representing monopoly and monopolistic competition market structures. Identify their key characteristics in relation to the factors used to differentiate between the market structures. Using the real 5/5 data from your case studies analyse how well each case study fits with the different market structures. Part C – (6 marks) For the monopoly firm in your case study, identify the potential market power that it has and the types of controls (if any) that are in place to limit this. Part D – (6 marks) For the monopoly firm in your case study, identify if there are other benefits generated by the monopoly that would be difficult to gain from a monopolistic competition market structure. Part E – (6 marks) For the monopolistic competition industry, identify the extent to which firms are able to differentiate their products, and whether this allows them to gain some price advantages. SOLUTION Monopoly and monopolistic competition market structures Monopoly Market Structure The monopoly is understood to be the market structure associated with single seller of a product which has huge demand either as a result of necessity or because...
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...Market Structure & Maximizing 1 Assignment: Market Structure & Maximizing University of Phoenix Xeco/212 Principles of Economics Market Structure & Maximizing 2 Market structure can be characterized as the number of firms that are competing in a particular market; along with the ways in which the companies within these markets are alike or different and the barriers to entry that exist for these given market. The level of rivalry or competition also plays a powerful role in what kind of structure emerges in a given market. This paper will focus on competitive markets, monopolies, and oligopolies by detailing the distinctions between them such as how is price and output is determined to maximize profit, analyzing their barriers to entry: and what role each market structure plays in the economy. Price control is different in each market structure and is essential to know for maximizing profits. A company ability to control the price of its goods and services is called price management. Businesses that operate in a perfect competition market structure have no control over the price of their goods and services. Companies that have the ability to control the price of the products or services are companies that have the benefit of operating under a market structure called monopoly. Organizations that run under an oligopoly enjoy the same control over price as monopolistic competition or monopoly...
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...Market Structure and Models Market structure is a very important concept because the impacts of it affect the outcomes of the market. The market structure is organized according to key characteristics such as the number of firms in the market, the control over the price of the relevant product, the type of the product sold in the market, the barriers to new firms entering the market, and the existence of non-price competition in the market. The goal of the market structure is to arrange all of that affect in order to explain and forecast market outcomes. The structures focus on the affects of economic behavior on competition. These markets are classified according to the structure of the industry serving the market. First I will discuss Pure Competition. Pure Competition involves many firms producing a standardized product, identical to its competitors. Consumers will be unresponsive to which producer is selling in a purely competitive market, making sellers have no control over their prices, but since there are such a large number of suppliers of the product, no firm views another supplier as a competitor. There is little competition under pure competition. No single firm leads in the market under pure competition, which makes it a very desirable market. There are three stipulations that make a market structure "purely competitive." Homogeneity of product means that the product sold by any seller in the market is identical to the product sold by any other supplier. If...
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...Market Structure is defined by the number of firms who are competing in that market, the factors that differentiate the firms from each other, the similarities between the firms, and any obstacles that would exist to any firm that wanted to enter the market. The level of competition exerts significant influence over the type of market structure that emerges and leads to what payoffs, if any, would result from entering that market. This paper will go into detail on the many distinctions between the different market structures, the obstacles to entering these markets, and how each type of structure maximizes profits. Markets are broken down into a few various categories. These categories are perfect competition, monopolies, monopolistic competition and oligopolies. An economist, citing economic theory, may express a preference to one type of structure based on the outcomes they can yield. The structure of each structure type is based on the traits of its business types. The attributes a business will display changes with the number of companies in that particular market. Management of prices, product types and entry barriers for new companies and market competition that do not depend on price are the attributes of a market. The capacity to control the prices of a company’s goods is price management. This is a critical element in market structure. Any company that can enjoy the benefits of a monopoly structure has ultimate price control for its goods. Those...
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...RPVV, Surajmal Vihar Support Material For Teachers In Economics – Class XII Co-ordinators Dr. Seema Srivastava Ms. Meenakshi Yadav Contributors Dr. Seema Srivastava Ms. Meenakshi Yadav Mr.Bharat Thakur Technical Support Mr.V.K.Sodhi Ms.Sapna Yadav Ms.Radha Ms.Garima Ms.Ritu Class – XII Teaching -Learning Material for PGT (Economics) Based on “Week- Wise Distribution of Syllabus 2011 -2012” For the Month of July: Unit-IV (18.07.2011 – 25.07.2011) 7 days (25.07.2011-30.07.2011) 6days Abstract Present unit deals with the Concept of Market Structure which comprises of different market conditions under which the firms produce and sell products in the market. The unit also elaborates upon various Forms of Market Structure such as Perfect Market and * Imperfect Market (*Monopoly, Monopolistic Competition and Oligopoly). The conditions and determination of price under various Forms of Market Structure have been discussed. The content based classroom activity has been suggested at the end. It will help in developing Critical Thinking & Analytical ability among students which is the demand of this subject. Questions based on the content to check the progress have been included. Different types of Questions such as Very Short Answer Type, Short...
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...SUMMARY OF REPORT I. Introduction to Four Market Structure II. Comparative Characteristics of Four Market Structures III. Four Market Structures a. Pure Competition i. Characteristics ii. Demand Curve iii. Examples iv. Summary b. Pure Monopoly v. Characteristics vi. Demand Curve vii. Examples viii. Summary c. Oligopoly ix. Characteristics x. Demand Curve xi. Examples xii. Summary d. Monopolistic Competition xiii. Characteristics xiv. Demand Curve xv. Examples xvi. Summary FOUR MARKET STRUCTURES Market structure is the selling environment in which a firm produces and sells its product The preceding chapter on the theory of production and cost made us understand the behavior of producer towards an efficient use of productive inputs because the use of inputs is associated with economic cost be it explicit or implicit cost. Efficient use of resources means proper identification of the use of the land, labor, capital and entrepreneur. These should not be underused as in 1st stage production or overused as in the 3rd stage of production, so that the cost associated to the production level can be minimized. This chapter examines a broad range of markets and explains how the pricing and output decisions of firms depend on market structure and the behavior of competitors. To determine...
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...Market structure refers to the interchanging characteristic of the market. These aspects are able to influence business decisions by altering the marketing mix and business strategies such as pricing, competition, efficiency and supply. Although there are many features within market structures it could be argued that the numbers of firms is the most important as it relates to scales, extent of foreign competition, the nature of the demand curve, freedom of entry to industry and the nature of product. The main four market structures are prefect competition, monopoly, oligopoly also known of duopoly and monopolistic competition. Perfect competition is a market structure that has many firms that have no barriers to entry. It is easily accessible for new/ start-up companies, as they would have no problems with joining while producing a standardized product. Pricing is normally relatively low as most companies would not have the resources or capital to expand or develop the product. Start-up sole traders, such as convenience stores, are typical examples of perfect competition businesses. For such businesses being part of this environment is an advantage as high levels of competition can increase efficiency through the use of resources benefiting both the business and their customers. However due to the nature of the market, most companies are small so capital is limited, limiting how much the business can do making it harder to expand and grow within the market. Monopolistic...
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...BETWEEN MARKET AND MARKET STRUCTURE AND IMPLICATIONS FOR MANAGERIAL DECISION MAKING A market can be defined as a place or institutional arrangement which facilitates the interaction between buyers and sellers in a process that determines price and quantity sold. It can be a physical or virtual place and typically, the product being traded could be goods, service or information. Market structure, on the other hand, refers to characteristics of a given market such as the size of the market, number of buyers and sellers, nature of product being sold, mode of pricing and nature of market information. The structure of any market has a great influence on the behaviour of buyers and sellers in the market and thus affects the performance of firms operating in the market and, as could be expected, the decision making activities of managers of the respective firms in their bid towards achievement of the traditional profit maximization objective of the firm. There are four kinds of market structures that can be identified: Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly. We would examine the market structures and their effects on managerial decision making in turn. Perfect Competition Perfect competition is the idealized version of the market structure with existence of many buyers and sellers with free entry and free exit, homogeneity of the product sold, perfect mobility of resources or factors of production and perfect information among all market players...
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...Market Structures Adam Timothy Rider ECO204: Principles of Microeconomics Evelyn Carlson 10/13/2014 When trying to gain insight into the local economy it is very important to understand the big picture of how the various market structures relate to each other. This can be accomplished by putting together some of the smaller pieces or characteristic of the market structure. These characteristics can be organizational, competitive or a variety of other features that categorize a firm as a specific market structure. Individual market structures can be described as the amount of firms producing identical goods and services. If you can identify the market structure you can often identify how they firms within the structure are going to price their products in the industry. The market structure will have an effect on the supply and demand of the different commodities in the market. The market structure will also influence barriers for entry and exit in the industry. In order to understand these structures in an economic community you must obtain an understanding of how they all work together to form the economic community. By the end of this report you will possess the necessary knowledge to understand the market structures in the micro economy. Before we begin to the inevitable breakdown of the individual market structures it is important to identify some of the key features of market structure in general. First it would be important to look at the...
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...MARKET STRUCTURES Brandi Milostan ECO204: Principles of Microeconomics Professor Mellon July 6, 2015 Welcome Mayor Knowsnothing Congratulations on the start of your new journey Mayor Knowsnothing. I appreciate the opportunity to work with you and get you up to speed on all of the market structures and answer any questions that you may have. I will explain to you the characteristics of each structure and provide you with examples of each from our neighborhood. I’ll help you to understand what pressures they are faced with and how government limitations and international trade might affect them. So, let’s get started on another adventure for you in learning market structures! Let’s Learn the Market Structures There are four different types of market structures. The table below lists the four market structures and each of their characteristics. MARKET STRUCTURE | NUMBER OF FIRMS | TYPE OF PRODUCT | ENTRY INTO INDUSTRY | FIRM'S INFLUENCE OVER PRICE | EXAMPLES | PERFECT COMPETITION | MANY | IDENTICAL | EASY | NONE | AGRICULTURAL CROPS | MONOPOLISTIC COMPETITION | MANY | DIFFERENTIATED | EASY | MODERATE | MANY LOCAL RETAIL OUTLETS | OLIGOPOLY | FEW | EITHER IDENTICAL OR DIFFERENTIATED | DIFFICULT | MODERATE TO SUBSTANTIAL | AUTOMAKERS | MONOPOLY | ONE | UNIQUE | IMPOSSIBLE | SUBSTANTIAL | LOCAL UTILITY | (“Market Structures”, Economics Online Tutor, July 24, 2012) Perfect competition is used as a model for the other market structures...
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...Market Structures and Pricing Strategies Kiona Thomas American Public University Econ600 Abstract The article analyzes the four main market structures, which are perfect competition, monopolistic competition, oligopoly and monopoly. It provides a detail description of the market, as well as explains the pricing strategy a firm would pursue in that particular market. The article also concludes with a real world example of Visa pricing strategy by examining it oligopoly market structure. Visa has few competitors; however, it must continuously monitor its competitor’s actions in order to remain competitive in today’s market. While, Visa is currently out performing it competitors, they are constantly trying to expand their market. Keywords: market structure, pricing strategy, Potomac Edison Market Structures and Pricing Strategies Introduction Economist can divide today’s market into four different market structures, which are perfect competition, monopolistic competition, oligopoly and pure monopoly. The market structure will help the firm select their pricing strategy. Each market structure has a different pricing strategy the organization can use to achieve profit maximization. Perfect Competition What is perfect competition? Perfect competition is sometimes referred to as pure competition (Officer, 1966). According to Robinson (1934), perfect competition is “a state of affairs in which the demand for the output of an individual seller is perfectly elastic”...
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...Market Structure Econ 204 Instructor Taledo December 17, 2013 Market Structure Market Structure is defined as the number of firms that produce identical products. There are four theories that make up the market structure, they are perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these market structures is related to an increase or decrease in the price of a product and the purchaser’s response to the change. Throughout this paper, I will briefly describe each of the market structures listed and some its characteristics. Perfect competition also known as pure competition marginal cost equals marginal revenue. The industry is big and is made up of several small firms. Firms that participate in perfect competition is considered to be a price taker, neither the consumer or seller can cause an influence in the price of the product. In a perfect competition market structure there aren’t any barriers to enter or exit, so it is easier for firms to enter and exit the industry whenever they choose to. Secondly, there is the monopolistic competition. In monopolistic competition firms compete by selling differentiated products. Unlike perfect competition, firms in the monopolistic competition has a little control over the pricing of their products. Monopolistic competition is a non-price competition, the competition is based upon the differentiated products that each firm sells...
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...Monopoly, Monopolistic competition and Oligopoly Name Institution Monopoly, Monopolistic Competition and Oligopoly Introduction Monopoly business is a type of trade structure whereby there I only one producer of a product in the market. Hence, there are barriers existing that prevent other entrants interested in the market. A good example of monopoly businesses are the electricity companies. Two types of monopoly exist. It can either be legal or efficiency. Illegal monopolies exist when a corporation has developed new technology to keep production costs low enough to discourage competitors. On the other hand, legal monopolies exist when a business is subsidized by the government thus they are protected by the government from the competition. For instance, provision of local telephone services in the United States is an example of a legal monopoly. Strategies made by a firm to monopolize the market for good or service However, a company can decide to monopolize the market for a particular good or service. It can, therefore, set down strategies that enable it to become a monopoly. For instance, the firm might use vertical integration whereby it controls the entire supply chain, from production to retailing. Secondly, another strategy a company can employ is the use of horizontal integration whereby they decide to buy other competitors until they remain the only business in the market. Thirdly, a company might choose to set the cost of production of a commodity too high...
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