Research Analysis for Business.docx

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Research Analysis for Business By: Justin Adams ECO/561 April 15, 2019
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Research Analysis for Business There are four different types of market structures. They are Perfect competition, monopolistic competition, oligopoly, and monopoly. Each of them is unique in their own way. All four help you better understand underlying economic principles. Perfect Competition describes a market structure, where a large number of small firms compete against each other. The idea of perfect competition builds on a number of assumptions: (1) all firms maximize profits (2) there is free entry and exit to the market, (3) all firms sell completely identical (i.e. homogenous) goods, (4) there are no consumer preferences. By looking at those assumptions it becomes quite obvious, that we will hardly ever find perfect competition in reality. Monopolistic competition also refers to a market structure, where a large number of small firms compete against each other. However, unlike in perfect competition, the firms in monopolistic competition sell similar, but slightly differentiated products. This gives them a certain degree of market power which allows them to charge higher prices within a certain range. An oligopoly describes a market structure which is dominated by only a small number of firms. This results in a state of limited competition. The firms can either compete against each other or collaborate. A monopoly refers to a market structure where a single firm controls the entire market. In this scenario, the firm has the highest level of market power, as consumers do not have any
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alternatives. As a result, monopolies often reduce output to increase prices and earn more profit. (The Four types of Market Structures, n.d.) Starbucks The older I get the more it seems I rely on coffee and caffeine to get me through the day.
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