market structure - Running head ECO 204 MARKET STRUCTURE Market Structure Michelle M Everitt ECO 204 Principle of Microeconomics Ashford University

market structure - Running head ECO 204 MARKET STRUCTURE...

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Running head: ECO 204: MARKET STRUCTURE Market Structure Michelle M. Everitt ECO 204 Principle of Microeconomics Ashford University Nicholas Bergan February 29, 2016 1
MARKET STRUCTURE Abstract I will be talking about the different types of market structures as in perfect competition, monopolistic competition, oligopoly, and monopoly and what they all mean, how they are used, and how they are similar but different as well. I will also be comparing the four to each other. 2
MARKET STRUCTURE Market Structure First 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 Structures When it comes to economics there are four main market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. Each of these market structures faces the common factor of competition. There are many different degrees of competition that separates these market structures and the commodity or products plays a huge role in these market structures because some products have substitutes or identical products. Lastly, we will observe the barriers to which a firms face when entering or exiting the market. I find that this is the most important factors in the market structures because relative difficulty in entry and exit of the markets will determine what type of market structure we are examining. When it comes to market structures there are two extremes known as perfect competition and monopoly. An oligopoly is a market structure as well but it’s more in the middle of the spectrum of perfect competition and monopoly. Will go into further details when it comes to comparison and contrast to each market structure in short term and long term scenarios within this paper. Perfect competition and Monopoly Per “Perfect competition is a market structure in which the following five criteria’s are met: all firms sell an identical product; all firms are price takers they cannot control the market price of their product; all firms have a relatively small market share, buyers have complete information about the product being sold and the prices charged by each firm; and the industry is characterized by freedom of entry and exit. Perfect competition is sometimes 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 are perfectly elastic while monopoly’s demand curves in a negative sloping and in turn is why these small firms are price takers and have no market control while the monopoly industries is made up of one single firm and is considered to be a price maker of the products. Also keep in mind that monopoly’s also have full market control of the product just like perfect competition.

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