Market Structure Of An Economics Perspective

1728 Words Nov 16th, 2016 7 Pages
Market structure from an economics perspective is defined as the characteristics of the market that impacts the behavior or way firms operate, which economists use to determine the nature of competition, and pricing tactics of businesses in the market. Within a market, the market structures are distinguished by key features, including the number of sellers, homogeneous or differentiated goods or services produced, pricing power, level of competition, barriers to entering or exit the markets, efficiency, and profits. The interaction and differences among these features resulted in four market structures of competition: perfect competition, monopolistic competition, oligopoly, and monopoly. Economist assembled the four market structures into two groups; perfectly competitive market and imperfectly competitive market, which are vastly distinct when it come to the different market competitions that need to be satisfied.
A major issue for existing firms in some market structures is the entry of new competitors, and this is because of the potentially unfavorable effects new participants might have on the market 's real revenue and profits. Entry barriers are specifically designed to prevent new competitors from entering a profitable market freely. Based on the level of barriers, it can be relatively easy or difficult for new firms to enter the market. Therefore, high entry barriers may have a positive or negative influence a firm’s long-run profitability, cost…
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