Economics of health care

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1
There are four main primary structures namely; perfect competition, monopoly, oligopoly and monopolistic competition. Perfect competition is a result of large number of firms selling homogeneous goods competing with each other in a non restricted market and having perfect knowledge of market. Monopoly is a market whereby there is one dominant firm, there is restriction to entry (Myers, Tauber, & American Marketing Association, 1977). This firm creates shortages in order to push up prices. They produce at higher cost due to lack of competition. In oligopoly there are few firms selling same products. A time they collude to push up the prices but due to mistrust they end up competing with each other. Monopolistic competition is the last one whereby there are several firms in a single industry, selling similar but differentiated products. In this kind of market, consumers benefit from different prices and varieties. Prices differ due to different production cost. Firms in this market also don’t influence the products and prices of others.
2
In the long run all factors of production are fixed. In the long run monopolistically competitive firm will operate at a higher cost. It can neither allocate nor produce efficiently. Firms will be making alt of profits in some markets then others will enter in large numbers to compete for the same profit hence driving prices downwards and profit. As firms enter they will be making profit but the firms will keep entering as long as there is still profit being made until it reaches a point where profit becomes zero (Myers, Tauber, & American Marketing Association, 1977). It reaches a point whereby a market will be making loses, at this point firms will start leaving the market hence pushing prices upwards and losses down. The firms will leave until the profit reaches zero level