Market Structures : Perfect Competition, Monopoly, Monopolistic Competition And Oligopoly

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Executive summary
The main purpose of this report is to introduce four market structures – perfect competition, monopoly, monopolistic competition and oligopoly, and their determinations of price and output. It also discussed the possibility for firms to generate profits in the short-run and/or in the long-run within these four market structures. It will be shown in the discussion that both monopolistic and oligopolistic firms are able to generate profits in both short-run and long-run, while firms in perfect competition and monopolistic competition could only make profits in the short-run but not in the long-run. In the last section of the report, it provided a case of a Chinese monopolist in the railway service industry and talked about its pricing strategy when studying the monopolistic inelastic demand curve.
1. Introduction
Identifying which type of market a firm is performing business in is important for a firm. Being in different types of the market will affect a firm’s ability to determine the price and thus generate profits. It also affects a firm’s ability to make profits in the long-run (Dietl 1998). In the case of China Railway Group Limited which will be discussed in this report, its monopolistic power helps it to regulate the prices of railway tickets as well as to achieve profits in the long-run. Hence, it is very vital and helpful for a firm to know which market it is in (Robert & Cave 1999), in order to understand its power to set the monetary value. Having

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