...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 number of firms in the market. This...
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...CHAPTER 25 Monopolistic Competition and Oligopoly A. Short-Answer, Essays, and Problems 1. What are the major features of monopolistic competition compared to pure competition and pure monopoly? 2. “Pure competition or pure monopoly industries will tend to be one-price industries. Monopolistic competition, however, is a multiprice industry.” Explain. 3. How does economic rivalry take place in monopolistic competition? Describe the different aspects of product differentiation and price competition. 4. What are types of firms that exemplify monopolistic competition? 5. How are monopolistically competitive industries identified with concentration ratios? 6. Assume that the short run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of output and enter these figures in the table. Total Marginal Quantity Marginal Output cost cost demanded Price revenue 0 $ 25 0 $60 1 40 $_____ 1 55 $_____ 2 45 _____ 2 50 _____ 3 55 _____ 3 45 _____ 4 70 _____ 4 40 _____ 5 90 _____ 5 35 _____ 6 115 _____ 6 30 _____ 7 145 _____ 7 25 _____ 8 180 _____ 8 20 _____ 9 220 _____ 9 15 _____ 10 265 _____ 10 10 _____ ...
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...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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...Monopolistic Competition and Oligopoly 13 Monopolistic Competition W e have now examined two “pure” market structures. At one extreme is perfect competition, a market structure in which many firms, each small relative to the size of the market, produce undifferentiated products and have no market power at all. Each competitive firm takes price as given and faces a perfectly elastic demand for its product. At the other extreme is pure monopoly, a market structure in which only one firm is the industry. The monopoly holds the power to set price and is protected against competition by barriers to entry. Its market power would be complete if it did not face the discipline of the market demand curve. Even a monopoly, however, must produce a product that people want and are willing to pay for. Most industries in the United States fall somewhere between these two extremes. In this chapter, we focus on two types of industries in which firms exercise some market power but at the same time face competition. One type, monopolistic competition, differs from perfect competition only in that firms can differentiate their products. Entry to a monopolistically competitive industry is easy, and each industry is made up of many firms. The other type, oligopoly, is a broad category that covers many kinds of firm behavior and industry structure. An oligopoly is an industry comprising a small number of competitors; each firm in an oligopoly is large enough to have some control over market price...
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...comes under Monopolistic competition market structure. Because Nokia is in that market which have all the characteristics of perfect competition and of monopoly .Its control over market by unique or differentiated products.From Starting Nokia made different and good quality Mobiles.Now Nokia have a goodwill. Before Some year Mobile industry comes under oligopoly market because at that time there is very less no of producers in this industry but now from last few years industry expand and market shift from oligopoly to monopolistic market where large no of buyers and sellers. So Now Nokia under the Oligopoly Competition. 1) No entry barrier: In mobile manufacturing industry any new company joins the industry and any company leave the industry any time because there is no such restriction in this market there is no need of Big funds in required, no legal restriction and no such economic barriers are there for new entrants. 2)Large number of Buyers and Sellers:This Point is Mach with Ferfect Competition . In India more than 70% of population use mobile, so there are large no of buyers active in mobile market. But from last two-three years so many new entrants are active in mobile manufacturer market but in this market Nokia still have 38% market share. 3) Selling costs: Nokia sell their product through different way like: Packing, Commission to distributors, Advertisements and other incentives. These production costs also increase the cost of product differently...
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...Consider Singapore retail firms (retailers) and discuss if oligopoly or monopolistic competition best explains these retailers’ market behaviour. Does oligopoly or monopolistic competition better explain the market behaviour of Singapore retail firms? First, a few definitions are in order. First, retailers are firms that do not produce their goods that are sold, but only sell goods which are in turn manufactured by manufacturers or producers. Second, oligopoly is characterised by many buyers but few sellers, each of the sellers interacting strategically against their rivals, which are the other firms competing in the oligopolistic industry, and there are high barriers to entry, usually caused by high economies of scale. Third, monopolistic competition is a market structure where there are many buyers and sellers, few barriers to entry, and differentiated products that are quite different from other competitors, but psychologically or physically different. For example, NTUC and Giant hypermarket are examples of oligopoly while clothing retail shops such as Charles and Keith are examples of monopolistic competition. First, monopolistic competitive firms can make independent decisions on pricing and output, whereas oligopolies are mutually interdependent because they are rivals rather than competitors. There is price stickiness in oligopoly, shown by the oligopoly kinked demand curve model, which shows there is no incentive for firms to raise or lower prices as long...
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...Evaluate the effectiveness of monopolistic competition and oligopolies in meeting the needs of producers and consumers. A market is a place where buyers and sellers meet to exchange money for goods and services. There are four market structures; perfect competition, monopolistic competition, oligopoly and monopoly. Each structure of market operates in their own ways with each with their own characteristics; each structure has its own number and size of the firms, the level of the competition, product differentiation and difficulty of entering new firms into the market. The two similar structures are monopolistic competition and oligopolies; although they are similar they still operate quite different to each other. Monopolistic competition is defined as the structure with many small firms selling products of similar kind, therefore lots of choice and lots of range which means that there are lots of substitutes. Due to the fact that there are lots of substitutes price plays an important role; if a firm has established some sort of brand name or store name it will be able to charge a slightly increased price, but yet a very high increase in price will result in decrease of its market share. As firms have a very limited control on price to gain more consumers firms are involved in strong non-price competition of quality, advertising, packaging, promoting brand names, etc… To enter into a monopolistic market is relatively easy as there is no established market. Examples of this...
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...companies operate within different market structures, which include pure competition, monopoly, monopolistic competition, and oligopoly. These market structures are characteristic descriptors that reflect the strength of buyers and sellers within the market. This writing will examine each of these market structures and identify a company which operates within the market structure. This writing also examines Quasar Computers, a fictitious company in which the authors participated in a software simulation. Throughout the simulation the Quasar evolved through the four market structures. This writing will identify the findings of that evolution through the life cycle of their products and the changes of buyers and sellers over time. Pure Competition In pure competition, a large number of independent sellers of standardized products characterize the market. Information is free flowing and free entry and exit exist. The seller is the price taker and not the price maker (McConnell & Brue). The firm in perfect competition is a structure that demonstrates the market under degrees of completion, given certain conditions. Pure competition is an unlikely scenario and is rare in the real-world; moreover, this market model is significantly important. One can learn from this model, from various markets, such as form agricultural, fish products, from foreign trade, and metals. The text illustrates pure competition as, “a meaningful starting point for any discussion of price and output...
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...for only the highest quality meats, cheeses and diary, bakery products. In 1930 the start of Publix humble beginnings as a food store in Winter Haven, Florida. Publix has grown to one of country leading super markets in the southeast, with over 1,100 super markets in six states (“Publix”,n.d.). Publix employs more than 168,500 people. Publix is the largest employee owned grocery chain in the United States. This paper will highlight the importance of research to the marketing strategy and the direction in which Publix Super Markets Inc heads. Additionally this paper will cover competitive intelligence and analysis in order to explain the role it plays in the development of marketing strategies and tactics. Industry The industry that Publix operates in is the grocery industry, which would be an example of a monopolistic competition. Monopolistic competition occurs when there are many different firms competing for market share over similar products. There are generally low barriers to entry, which means it is easy for a small company to become a competitor in the market (David C. Colander, 2013). All of the companies in this system sell similar products and must make a strong effort towards product differentiation. Products and services are considered to have a high elasticity of demand; meaning consumer has many comparable alternatives to choose from. If a firm decides to raise prices, a consumer in a monopolistic completion market should find it easy to find a similar alternative...
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...market share. The composition of competitive firms is known as the market structure. The grocery industry is an example of monopolistic competition. This type of market structure can have a positive and a negative impact on the structures competitive strategies. Monopolistic Competition Monopolistic competition occurs when there are many different firms competing for market share over similar products. There are generally low barriers to entry, which means it is easy for a small company to become a competitor in the market. All of the companies in this system sell similar products and must make a string effort towards product differentiation. Products and services are considered to have a high elasticity of demand; meaning a consumer has many comparable alternatives to choose from. If a firm decides to raise prices, a consumer in a monopolistic competition market should find it easy to find a similar alternative in their local area (Corcelli 2006). This differs from monopolies and oligopolies. A monopoly market is only one single seller. An oligopoly market is dominated by a small number of larger companies selling slightly different goods. Both a monopoly and oligopoly market structures only have a small number of competitors and still perform product differentiation, but they rarely compete on prices. It is also different form perfect competition, because it lacks a high level of efficiency though they share the characteristic that in the long-run equilibrium, organizations...
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...OLIGOPOLY AND MONOPOLISTIC COMPETITION Up to now, we have covered two extreme types of markets. We covered perfect competition with the highest degree of competition, then we covered monopoly with the lowest degree of competition. Now, we will cover oligopoly and monopolistic competition. These two market types are in between two extremes: they show some features of competition and some features of monopoly. Oligopoly Definition: Oligopoly is a market structure in which there are a few sellers and they sell almost identical products. There are barriers to entry in oligopoly. Oligopoly is characterized by the tension between cooperation and self- interest among these sellers. For example, if the oligopolist firms can cooperate, they can charge a high price and share profits. But if they cannot cooperate and instead they compete because of following their own self-interest, then price goes down and profits decline. We will give examples of this later. Oligopoly Examples: crude oil (Kuwait, Iraq, Saudi Arabia, Venezuela, Kazakhstan, Azerbeijan) , coke (Coca Cola, Pepsi, Cola Turka), GSM providers (Turkcell, Vodafone, Avea), inter-city bus transportation (between Istanbul & Denizli: Varan, Ulusoy, Pamukkale, Köseoğlu), airline travel (between Istanbul and Frankfurt: Turkish Airlines, Pegasus, …) etc. Monopolistic Competition Definition: Many firms sell products that are similar but not identical. There is free entry and exit like perfect competition. But at the same time, there is...
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...of other firms in this industry? Is it monopolistic competition, oligopoly, monopoly, or perfect competition? Justify your classification of the firm. Use the characteristics/features of the different market structure to determine which market structure to classify your chosen firm. Currently I receive cable and internet services through Comcast Cable which is under the umbrella of the home technology services industry. Other firms in this industry in my area include Dish Network, AT&T, and DIRECTV. This industry falls under the Oligopoly market model because there are few firms offering these services and the product is concentrated. The four different types of market structures are pure monopoly, pure competition, monopolistic competition, and oligopoly. Firms and industries are classified into a market system by the total number of firms in the industry; type of products produced; the market power of the firm; and the barriers to entry into the industry. Pure monopoly is one in which there is a sole seller of a good or service, for example electricity. In this type of market structure, the product or service is very unique and there are no close substitutes. In this structure, product differentiation is not an issue. Pure competition describes a market that has a broad range of competitors who are selling the same products. It is often referred to as perfect competition. In an ideal purely competitive market, the products being sold would be identical, which removes...
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...between Market Structures Simulation Name: Date: Instructor: Characteristic | Perfect Competition | Monopoly | Monopolistic Competition | Oligopoly | Example | Dairy firms, Grocery Store | SKF | Nike | Wyeth | Product/service | Vegetables, milk etc | Bearings | Shoes, sports stuff | Pharmaceuticals, medicines | Entry Barriers | None-Low | High | Medium-High | High | Number of players | Many (over 1000) | Single | Few-Many | Few | Elasticity | >1 | <1 | <1 | Kinked demand therefore above price >1 and below price <1 | Economic Profit | NO | YES | YES | YES | Share of market | 0-1% | 80-100% | 15-20% | 40-60% | Firm Interdependency | None | None | Low | High | Price Discrimination | NO | Yes | Yes | Yes | Type of Product/service | Same | Unique | Differentiated | Homogenous/Differentiated | Collusion | Yes | No | No | Yes | Question11: There are numerous advantages of the supply and demand forces on the market and the way it operates. The most important is their market regulating utility, i.e. they help firms set a market clearing price, at which pay-off for both the seller and buyer can me maximized. They also help encourage competition as firms with better products can charge higher and thus make more profits. Although, this trend differs in different market structures but generally consumers are willing to pay more for better products. The biggest limitations of supple demand forces might be socially undesirable outcomes...
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...MARKET STRUCTURES MARKET STRUCTURE In economics, market structure (also known as market form) describes the state of a market with respect to competition. MAJOR MARKET FORMS The major market forms are: • • • • • Perfect competition, in which the market consists of a very large number of firms producing a homogeneous product. Monopolistic competition, also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share. Oligopoly, in which a market is dominated by a small number of firms which own more than 40% of the market share. Monopoly, where there is only one provider of a product or service. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. The correct sequence of the market stucture from most to least competitive is perfect competition, monopolistic competition, oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are: the number and size of producers and consumers in the market,...
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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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