Essay on Market Structure

Oligopolistic markets, such as supermarkets or car manufacturing, can be defined in terms of market structure or in terms of market conduct.

If a monopolist makes a profit, barriers to entry will keep other firms out of the industry.

Monopolistic competition is characterized by large number of sellers and buyers, similar but differentiated product, the easiness of enter and exit and each seller has the power of control over price. It is a competition that built up by the market because there is a competition between all of the substitute goods. There are many firms in this competition yet each firm only contributes a small total amount in the market shares. And this thing happen because the government wants to ensure that there is no strategic games played among firms in the market, for instance price collusion. Since there are so many firms, each of the firms are supplying only a small part for the market and no one can give a perfect prediction of what might

Monopolistic competition involves many firms competing against each other, but selling products that are distinctive in some way. For instance, stores that sell different kinds of apparel; eating places or markets that sells a variety of food. You can even think about sporting goods and alcohol. These are items that may be similar to a certain extent, but totally different in terms of perception because of the brands, and how they are marketed. When merchandise is unique, firms can have a mini-monopoly on a certain style or a certain brand. However, the companies that make these products have to compete with other brand names. The term monopolistic competition captures this mixture of mini-monopoly and tough competition.

By definition a Monopoly is exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices (Monopoly 2012). Individuals are often time fearful of a company or industry becoming a monopoly because it would control too much of a market share, and do whatever wants; this includes raising prices, to using excess capital to branch into even more areas (Rise of monopolies 1996). The market structure of a monopoly is characterized by; a single seller; a unique product; and impossible entry into the market (Tucker 2011). A monopoly can be a difficult thing to accomplish being that a single seller faces an entire industry demand curve due to the fact it makes up the industry as a

There will always be someone else trying to sell your product for less money. Many monopolies are enforced by government. One example would be operating a cab in New York City. You would need a government issued medallion. The number of medallions are fixed which develops profits for initial owners. The profits are not because of talents or resources, instead these profits come by the absence of government enforcement of the medallion requirement. The government enforcement of monopolies is an attempt to solve market failure. An example would be New York City enforcing the medallion rules because they are under the assumption that if they don’t restrict cabs, there would be a lot more traffic jams in the city. When government enforcement of monopolies is appointed for the well-being of subset being granted a monopoly instead of the well-being of society, that is when greed steps in. But monopolies can also improve welfare. For instance, a drug company developing new heart medication will pay lots of money in research and development for perfecting the drug without selling anything to achieve revenue. It anticipates that it will sell under a patent over some period of time and cover the development cost. If you take away the monopoly it takes away the motivation to produce better drugs. So if markets are not competitive then greed isn’t really a problem. It is only a

In practice, pure monopolies are very rare. For instance, a supermarket may be the only food supplier in a particular town, but if it raises its prices and retains too much of a profit, a competitor may enter the space. Even the threat of serious competition entering the market forces the existing firm to act conscionably and differently from how it would act otherwise. (Monopolies & Oligopolies) For example Wal-Mart is not only a clothing store but it also a grocery store. Another place that is similar to Wal-Mart is Meijer and Wal-Mart is significantly cheaper than Meijer this is why many people such as myself shop at Wal-Mart versus Meijer.

Oligopoly is defined as a market structure in which there are a few major firms dominating the market in an industry. One of the defining factors is that each firm explicitly feeds off of the competitors' moves and their potential responses in regard to setting prices, launching new products, etc. Under this model there is a level of implied cooperation. The firms understand that it is in their own best interests to maintain a stable price. If one of the firms subsequently lowers their prices, their competitors will do the same and knock out any advantage the original firm was hoping to gain with lower prices. However, if they raise their prices, the competitors may not do the same and can keep their prices fixed which will allow them to gain more market share.

Although there is easy entry and exit within the industry, some entry barriers include market experience and advertising. Monopolistic structure have less market power, because it faces many competitors, sells similar products and is small in relation to its market. An example of a monopolistic business is a hair stylist, although it can also include any business within the service industry. Within a monopolistic competition, a business maximises profits and produces products, where marginal revenue is equal to marginal costs. Monopolistic competitions generally have the ability to price how they choose.

In monopolistic competition, there are a relatively large number of firms, not the thousands of firms as in pure competition. The monopolistically competitive firms produce differentiated products, not the standardized products of pure competition. Product differentiation means that monopolistic competitors engage in some price competition because they have some limited “price making” ability based on the less elastic demand for their particular product. This demand, however, is more elastic than the demand for monopolists’ products. Monopolistic competitors, unlike most

A market is defined as an institution that brings together buyers (demanders) and sellers (suppliers) of a particular good or service. A Market structure is the relationship among the buyers and sellers of a market and how prices are determined through outside influences. There are four different types of market structures. Two on opposite extremes, and two comfortably in the middle. On one end is perfect competition, which acts as a starting point in price and output determination. Pure competition is when a large number of firms sell a standardized product, entry and exit is very easy, and an individual firm cannot control the price. On the other extreme end is Pure monopoly. A monopoly is characterized by an absence of competition, which will often allow one seller to control the market. A Pure monopoly is essentially the same thing, but also includes near impossible entry and no substitute goods. Two more common market structures are monopolistic competition and oligopoly. Monopolistic competition has a large number of sellers producing different products, while an oligopoly has only a few number of sellers producing similar products. All in all pure competition, pure monopoly, monopolistic competition, and oligopoly are all unique market structures with differing characteristics, but have one main goal, profit maximization.

Another advantage of a monopoly is that you can set the price to how high or low you’d like. Not only that, but you can make as much or as little of the product as you’d like. Monopolies can also make a huge amount of profit since no one has the same product as the monopoly so there is no competition. Monopolies can also afford to use the latest technology there is. Technology is always advancing and there are always going to be newer products that people use each time. Take a cash register for example. Cash registers used to be very low tech. It used to take a while to punch in all the numbers and use a credit/debit card, but now cash registers are fairly easy to use. Nowadays, cash registers are touch screen and the items are on the screen. It is fast, efficient, and easy to use the cash register.

The efficiency of monopolistic and perfectly competitive markets is monopolistic competitive arises when a large number of firms compete by making similar but slightly different products such as Nike or Reebok running shoes. In monopolistic competition, the output is less than the efficient scale of perfect competition. The efficient scale is the quantity of production at which average total cost reaches its minimum. Monopolistic competition has excess capacity in the long run. The equilibrium at the level of output by which price exceeds marginal cost of production creating a deadweight loss. Perfect competitive markets relate to an industry structure in which there are many firms producing homogeneous products. In perfect competition it produces at an efficient scale

In a monopolistic market, there is more control over pricing that in a monopoly. If they raise their prices, they will only lose a small amount of customers. A monopoly is a large enough business to influence its own price, such that it is the price setter rather than taker, unlike a perfectly competitive market where each firm

b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.