The Many Aspects of Market Structures
Denise Plumb
ECO204 – Principles of Microeconomics
Instructor Phelicia Price
February 1, 2015
I would first like to thank the mayor for the opportunity to provide the answers to the important questions that will help assist with the understanding of the different market structures of the businesses in the city. Hopefully with a deeper understanding of market structures and how they work, the mayor will be able to provide better insight on what will work best for his/her city. In order for us to understand the relationships between consumers and businesses, we must clearly understand the different characteristics of each market structure; these market structures include Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly. The first market structure that we will discuss is perfect competition. Perfect competition is a theory that is composed of six assumptions that if a market meets all six assumptions, then the market can be considered as a perfectly competitive environment and no individual or company has power to manipulate the market in their favor or increase the price of the item or service. “Perfect competition, neutralizes these strategic behaviors and conflictual interactions, resulting in the elimination of these distributions conflicts…perfect competition (associated with constant returns) dissolves these conflicts of appropriation since every individual can be paid according to his marginal contribution” (Berta, Julien, Tricou, 2012, Pg. 7). The first assumption in a perfect competition is that there is a large number of sellers/producers that saturate the market resulting in no single seller having the ability to affect the price in the industry. The second is that there is a large number of consumers/buyers allowing the market to be safe