Answer to Question #243838 in Macroeconomics for Soliy

Question

Have you experienced different market structures in your day to day activities? If you have, which types of market structure is? Please explain the characteristics for each market structure and give an example for each.

Answer 1

#243838

Yes. l have experienced four types of market structures.

These market structures are:

1. perfect competition market structure
2. monopolistic competition market structure
3. monopoly competition market structure
4. oligopoly competition market structure

In a perfect competition market structure ,the market has the following characteristics:

1. Many buyers and sellers in the market.
2. Both producers and consumers are price takers where the forces of supply and demand set the market prices.
3. There is freedom of entry and exit in the market.
4. The government has little or no control over the market.
5. All the sellers in this market supply an identical product.

An example of a perfect competition market is an agricultural market.

In a monopolistic competition market structure ,the market has the following characteristics:

1. All the firms are free to enter or exit the industry.
2. A large number of buyers and sellers.
3. Product differentiation but these products are near substitutes.
4. Firms compete with one another without changing the prices of their products.
5. Varying preferences of consumers.

An example of monopolistic competition market structure is restaurants.

In a monopoly competition market structure, the market has the following characteristics:

1. The market is regulated by a single supplier.
2. Barriers to entry or exit the market.
3. A firm maximizes profits by selling at a higher price and earns higher profits.
4. Product provided by the firm is unique and tend not to have close substitutes.
5. Price discrimination where they can charge different prices for the same product .

An example of a monopoly market structure is my local natural gas company.

In an oligopoly competition market structure ,the market has the following characteristics:

1. Interdependence of various firms in decision making.
2. Advertising is a powerful instrument in order to capture a large part of the market.
3. Lack of uniformity in the size of firms where some are small and others are very large.
4. Existence of price rigidity by firms.
5. There is no unique pattern of pricing behavior.

An example of oligopoly market structure is the steel industry.