Market Structure : A Monopoly And A Perfect Competitor

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Market structures are either imperfect competition or perfect competition, referring to the environment in which a firm competes in. These are monopolies, oligopolies, monopolistic competitions, and perfect competitions. A monopoly is one market in which there are no substitutes and entry is difficult into the market. There are four variables for a monopoly to occur. An oligopoly is a market structure that has only a few sellers but the products are either differentiated or homogeneous. Monopolistic competition has elements of both a monopoly and a perfect competitor. With multiple sellers and differentiated products, a monopolistic competitor is able to produce with these advantages of both market structures. The final market structure is perfect competition. Perfect competition occurs when there are many sellers and buyers, identical products, mobility of resources, and complete knowledge of the market. Overall, a firm must decide which market structure is best to involve themselves in. A pure monopoly is not legal in the United States, but a natural monopoly or one enabled by the government is. An oligopoly is uncertain in the long run analysis. A monopolistic competitor must make sure it’s price strategy is suitable for the industry or they will stand to lose profit. Perfect competition, however, “has never really existed” (Salvatore, 2012, p. 374). Therefore, a firm faces a difficult task in deciding which market structure to produce in and must
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