Answer to Question #216014 in Microeconomics for Boaz

Question

Q2--Analyze and compare the four market structures with respect to their characteristics (perfect competition, monopoly, monopolistic competition and oligopoly)
Give real world examples of each market structure and relate (for instance if you state that Microsoft is an example of Monopoly , you have to relate and justify on that why it belongs to a specific market structure )

Answer 1

Perfect Competition- This is a market structure in which new organizations face no obstacles to entry, there are many producers and customers, and the demand curve is completely elastic. In comparison to other market structures, it provides consumers with higher overall production at a cheaper price. The product is homogenous in this case. The items in this market are homogeneous in character. Every vendor sells the same or comparable items as the competition. Firms target their clients by manipulating product prices. Lower pricing gives you an edge over your competition. Free entrance and exit – There are no substantial barriers preventing companies from joining or exiting the business. This is a type of open platform for all businesses; businesses that produce comparable items may enter and do business without any barriers. An example of a perfectly competitive market is Agriculture. The items in this market are quite comparable. Carrots, potatoes, and grain are all general crops that are grown by a large number of farms. It is simple to purchase land and grow it since the product is homogeneous. It is also simple to withdraw from the market. As a result, the market exhibits crucial indicators of perfect competition.

Monopoly- Only one company works in the market, as the name implies. Customers have no other options when it comes to products and services. It is not feasible for any other company to enter. Public utilities, the railway sector, and sports leagues are all examples. Single seller - In this case, the firm and the industry are interchangeable. Only one company operates and has an impact on product pricing. Because it can manage the amount and quality of the supply, the firm has significant pricing control. There is no need for advertising. Covers the whole market share. It provides one-of-a-kind items for which there are no close replacements. Entry or exit is prohibited - Because the firm deals in a unique product, there is no way for a new company to break into the industry. Economies of scale are a major impediment. Exit is therefore not an option because the company's sole responsibility is to deliver products and services to customers.

Monopolistic Competition- This is a market with a high number of suppliers selling similar but not identical items to numerous clients. It is a form of imperfect competition in which numerous producers offer items that are distinguished from one another by the act of one firm's pricing on the prices of other companies. There is also freedom of entry and exit. Firms in this scenario provide identical items but employ a differentiation marketing approach and brand themselves differently. It is less efficient than the perfect competition due to higher prices and lower overall production. All businesses have a reasonable chance of making regular earnings in the long run. Fast food restaurants such as Pizza Hut and Taco Bell and clothes businesses such as Gucci are two prominent examples. The vendor here sells a comparable product but with a different price and branding strategy. In the market, there is the fierce rivalry.

Oligopoly- An oligopoly market is one in which a small number of large firms control the market by manufacturing homogenous or differentiated items. The market is dominated by a small number of companies that together affect product prices. The automobile and fuel industries such as Shell and Total, National Media Services such as ESPN are some of the examples. In this industry, just a few businesses operate and manage the market on a full-time basis. Each company analyzes how its competitors will react to its pricing, advertising, and output decisions. Before adopting any plan, companies conduct a competitive study. High competition, a large initial level of expenditure, and rivals' techniques are the primary barriers to entry for new sellers in the market.