Cash-back offer from May 7th to 12th, 2024: Get a flat 10% cash-back credited to your account for a minimum transaction of $50.Post Your Questions Today!
In an eight- to 10-page paper, describe each market structure discussed in the course (perfect competition, monopolistic competition, oligopoly, monopoly), provide a real-life example of each market, and respond to the following for each market structure:
Indicate how high entry barriers into a market will influence:
Long-run profitability of the firms
Cost efficiency of the firms in the industry
Likelihood that some inefficient firms will survive
Incentive of entrepreneurs to develop substitutes for the product supplied by the firms
Are competitive pressures present in markets with high barriers to entry? Explain.
Describe which market structure you would prefer for selling products. Explain why and support your answer with the characteristics of that market.
Describe which market structure you would prefer for buying products. Explain why and support your answer with the characteristics of that market.
How does each market structure respond to price changes of the products that they sell? Explain whether each market structure will be selling elastic or inelastic products, and how this will affect the market price charged.
How does the role of the government affect each market structure’s ability to price their products?
How does international trade affect each market structure?
The Market Structures Final Paper
Please Login or Register To Submit the Solution for the Question
1. Market Structures
A. Perfect competition
According to Tejuan Pettinger (2016) perfect competition is a market structure where many firms offer homogenous product(s). This market structure gives buyers and sellers the freedom of enter and exit the market, and there is perfect information to buyers and sellers regarding availability, prices, and quality of goods being traded, in this situation the firms involved make normal profits and the prices will be kept low due to competitive pressures.
Buyers and sellers should be abundant and too small to have any degree of individual control over prices, all the buyers and sellers should have the same aim of maximizing their profits (income) are among the conditions to be set in order to have a free market. All firms should also have equal access to technology and resources and there is constant or decreasing returns to scale (“perfect Competition”, 2016).
Real Life Examples
According to Economics Online Ltd (2016), very few markets or industries in real life are perfectly competitive. For instance, it is completely difficult for firms to have homogenous output since even the smallest firms in the manufacturing or service industries try to their product. Secondly, the assumption that buyers and sellers should act rationally is questioned by behavioural economists since in many complex situations, decision making by consumers and producers can be biased.
However, although unrealistic, the perfect competition model may be useful in two respects. Firstly, most primary and commodity markets such as coffee and tea exhibit many of the features of perfect competition such as the number of firms producing these commodities that exist, and their ability to influence market prices.
Influences of High Entry Barriers in perfect competition
Investopedia (2015) states that in this instance, firms experience no barriers of entry.
B. Monopolistic competition
Edward Chamberlain and John Robinson are the two economist who identified monopolistic competition as a market structure. Monopolistic competition occurs in a market situation where firms have many competitors offering similar but not identical products. Monopolistically competitive markets exhibit the following characteristics: (i) Decisions about price and output are based on its market, products, and cost of production are consequently made independently by each firm; (ii) knowledge is widely disseminated between participants, but it is unlikely to be perfect; (iii) there is freedom to enter and leave the market due to absence of barriers of entry or exit; (iv) Products are differentiated; (v) Firms make their own prices, and are faced with a downward sloping curve. This is due to the fact that each firm makes a distinctive product, thereby it can higher or lower its prices than its rivals; (vi) firms under monopolistic competition have to engage in advertising due to the fierce competition with other local firms which offer similar goods or services; (vii) Monopolistically competitive firms are presumed to be profit maximizers due to their tendency to be small and; (viii) there is heavy presence of independent firms competing in the market (Economics Online Limited, 2016).
Real Life Examples
Examples of monopolistic competition include android which dominates smartphone operating systems, outselling windows, iOS, and OS x claiming 53% of all devices.
Secondly, as at 2015, Apple iPads led the tablet market with 29.6% market share. However, this is much lower than the 60% shares Apple enjoyed in 2011. It enjoys monopoly over companies like Samsung, Asus, and Lenovo (Will Lipovsky, 2016).
Influence of high entry barriers
There are no significant barriers to entry.
C. Oligopoly
Oligopoly is a market structure whereby the industry is majorly controlled by a limited number of firms, where products in this market are highly differentiated but homogenous. Due to high barriers of entry, prices charged on products in this market remain stable for long periods of time. The presence of only a few competitors in this market ensures that prices charged on products and services remain constant for long periods of time (Barbra Dozier, 2014).
Real Life Examples
Some real life examples of oligopolistic industries include:
Satellite TV providers such as DISH Network, Direct TV etc., auto manufacturers like GM Motors, Ford, Chrysler etc., oil companies like BP, Chevron etc., Col companies like Pepsi, Coke etc. (Kevin McNutt, 2011).
Influence of high entry barriers into a market in on long run profitability.
In oligopolies, big bu...
The benefits of buying study notes from CourseMerits
Assurance Of Timely Delivery
We value your patience, and to ensure you always receive your homework help within the promised time, our dedicated team of tutors begins their work as soon as the request arrives.
Best Price In The Market
All the services that are available on our page cost only a nominal amount of money. In fact, the prices are lower than the industry standards. You can always expect value for money from us.
Uninterrupted 24/7 Support
Our customer support wing remains online 24x7 to provide you seamless assistance. Also, when you post a query or a request here, you can expect an immediate response from our side.
