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Running head: ECO 204: MARKET STRUCTUREMarket StructureMichelle M. EverittECO 204 Principle of MicroeconomicsAshford University Nicholas BerganFebruary 29, 20161
MARKET STRUCTUREAbstractI will be talking about the different types of market structures as in perfect competition, monopolisticcompetition, oligopoly, and monopoly and what they all mean, how they are used, and how they aresimilar but different as well. I will also be comparing the four to each other. 2
MARKET STRUCTUREMarket StructureFirst I would like to thank you for hiring me on as your new consultant and trusting my knowledge when it comes to the ins and outs of the various market structures. Secondly I would like to go ahead and start off by describing the different market structures. Differences in the Market StructuresWhen it comes to economics there are four main market structures: perfect competition, monopoly, monopolisticcompetition, and oligopoly. Each of these market structures faces the common factor of competition. There are manydifferent degrees of competition that separates these market structures and the commodity or products plays a hugerole in these market structures because some products have substitutes or identical products. Lastly, we will observethe barriers to which a firms face when entering or exiting the market. I find that this is the most important factors inthe market structures because relative difficulty in entry and exit of the markets will determine what type of marketstructure we are examining. When it comes to market structures there are two extremes known as perfect competition and monopoly. An oligopolyis a market structure as well but it’s more in the middle of the spectrum of perfect competition and monopoly. Will gointo further details when it comes to comparison and contrast to each market structure in short term and long termscenarios within this paper. Perfect competition and MonopolyPer “Perfect competition is a market structure in which the following five criteria’s are met: allfirms sell an identical product; all firms are price takers they cannot control the market price of their product; all firmshave a relatively small market share, buyers have complete information about the product being sold and the pricescharged by each firm; and the industry is characterized by freedom of entry and exit. Perfect competition issometimes referred to as “Pure Competition”. Each of these four aspects is compared when examining the difference between perfect competition and monopoly.In perfect competition there are a large number of small firms. Perfect competition firms demand curves that areperfectly elastic while monopoly’s demand curves in a negative sloping and in turn is why these small firms are pricetakers and have no market control while the monopoly industries is made up of one single firm and is considered tobe a price maker of the products. Also keep in mind that monopoly’s also have full market control of the product justlike perfect competition.