Market Structures Final Paper

Market Structures Final Paper

1. PERFECT COMPETITION

Large number of sellers and buyers: The number of participants in this market structure from both supply and demand sides is significantly such that individual output or demand does not affect the overall market price and industry output.  The impact of a single firm on the overall market is negligible, and therefore it does not consider other enterprises as personal rivals.  Larger number of sellers leads to lower average price and smaller dispersion in prices in the market ( Hackl, Kummer, Winter-Ebmer, & Zulehner, 2014)

Free and entry and exit: In a perfectly competitive market structure, there are no obstacles to the mobility of resources that is capital and labor. Consequently, there are new entrants to take up the advantage of the existence of supernormal profit while other are free to exit due to inefficiency.

Homogeneity in products: all companies in the industry are perceived to be producing standardized or homogeneous products. The products are viewed as perfect substitutes in the eyes of the consumer and thus uniform pricing policy across the industry.

The existence of perfect information: The consumers, resource providers, and the enterprises in this market structure have all the necessary and essential information for economic decision making. Firms are aware of the production technology, prices of the inputs, and the marketing selling price. On the other hand, consumers who act as suppliers of inputs know the remuneration for supplying their inputs.

An example of the perfect competitive market structure is the Automobile industry where there are many firms such as Ford, Volkswagen, BMW, Mercedes-Benz, Toyota and many consumers with perfect knowledge of the market conditions.

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2. MONOPOLISTIC COMPETITION

This market structure consists of enterprises producing similar products but slightly differentiated. The market structure lies between the extreme part of indifferent aspects from perfect competition and lack of close substitutes in the monopoly structure. In this case, customers may be willing to make an extra payment, but if the difference between the….Continue Reading….

3. OLIGOPOLY

The market structure has a small number of companies which are dominant and command the significant share of the market revenue with each being sensitive on the rivals marketing strategies (Nadia Hushke, 2010).

Oligopoly market structure has few firms selling products that are either completely standardized or serve as substitutes. However, the products are similar enough to create competition in the sector. The companies engage in non-price competition approaches to gain market advantage and increase sales volume rather than high-cost price….Continue Reading….

4. MONOPOLY

One dominant seller: The monopoly is the sole provider and has complete control of the industry and the marketplace making it difficult for other enterprises to enter. However, in cases of incomplete monopolies, it is possible for the firm to pull up prices with a small portion of the market served by lower priced….Continue Reading….

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