Differentiating Between Market Structures

1910 Words May 24th, 2015 8 Pages
Differentiating Between Market Structures
Don Peterson
ECO/365
February 2, 2015
Elena Zee

Differentiating Between Market Structures
A market structure in economics describes the state of a market with respect to its competition. There exist several different market structures like perfect competition, oligopoly, and monopolies among others. These markets all produce different types of goods or services, like public and private goods as well as common and collective goods. Firms operating in these different market structures utilize the labor market in very different ways because of very diverse uses of labor in each market structure, so it is important for a firm to use the labor market equilibrium principles to their advantage
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Different companies operate under different business models and one can see that under some market forms, firms have no control over price, in others they have the power to adjust price in a way that adds to its profits. There are different market structures with perfect competition at one end and pure monopoly at the other. In between are different forms called monopolistic competition and oligopoly that share some of the characteristics of both perfect competition and a monopoly competitive structure (Colander, 2013, Chapter 13). Perfect competition exists when products are homogeneous, and there are many firms too small to have any influence on the market price. These types of businesses can easily enter and exit the industry. A situation where even one producer can affect the price of a good by increasing or withholding output is called imperfect competition. Monopolistic competition exists when many producers of slightly differentiated products are able to sell them at well above their marginal cost. The core of the argument for competition is that as long as competition exists in markets no one producer or group of producers can afford to abuse power by charging too much or by selling bogus goods for fear that consumers might turn away from them to buy from other producers. In line with that argument one of the government’s tasks is to keep competition alive and functioning. A
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