2 - Yasmin Fernanda Prepichini

YASMIN FERNANDA PREPICHINI
1.Perfect Competition:
Describe the characteristics of a perfectly competitive market. Why is it considered the

most efficient market structure? Provide an example of a market or industry that closely
resembles perfect competition.
A perfectly competitive market includes numerous firms and consumers, with identical products,
unrestricted entry and exit, complete information, and no control over prices. It is deemed the
most efficient market due to its achievement of both allocative and productive efficiency. For
instance, the agricultural sector for staple crops like wheat and corn exemplifies this, with many
producers and consumers and nearly identical products.
2.Monopolistic Competition:
What are the key features of monopolistic competition? Discuss how product
differentiation impacts consumer choice in this market structure. Illustrate with an
example of a monopolistically competitive market.
Monopolistic competition involves many firms, differentiated products, unrestricted entry and
exit, some degree of market power, and competition beyond just prices. Product differentiation
enables firms to offer distinct products, affecting consumer preferences and choices. This results
in higher consumer satisfaction as individuals can select products that best suit their needs. The
restaurant industry illustrates this, with each establishment providing a unique dining experience.
3.Oligopoly:
Explain the concept of an oligopoly and its typical characteristics. How do oligopolies
impact pricing and output decisions? Use a real- world example to demonstrate how firms
in an oligopolistic market interact.
An oligopoly is a market dominated by a small number of large firms that are interdependent and
encounter entry barriers. These firms affect each other’s pricing and output decisions, which
often leads to stable prices and competition beyond pricing. The airline industry serves as an
example, where a few major airlines control the market and adjust fares based on competitors'
actions. Firms may either cooperate to boost profits or engage in intense competition, impacting
consumer choices and market dynamics.
4.Monopoly:
Define a monopoly and its unique features. Discuss the reasons for the formation of
monopolies and their implications for consumers. Provide an example of a monopoly and
explain how it maintains its market power.
A monopoly exists when a single firm controls the entire market with no direct competitors.
Characteristics include full control over pricing and supply, substantial entry barriers, and lack of
close substitutes. Monopolies often arise due to cost advantages, control of critical resources, or
governmental regulations. This typically results in higher prices and limited choices for
consumers. For example, a city’s water utility maintains its market dominance through exclusive
rights and control of infrastructure.
5.Comparative Analysis:
Compare and contrast the four market structures in terms of pricing strategies, barriers to
entry, and the level of competition. Which market structure do you think is most beneficial
for consumers? Justify your answer.
The four market structures vary in pricing strategies, entry barriers, and competition levels. In
perfect and monopolistic competition, prices are influenced by supply and demand, with low
barriers and high competition. In an oligopoly, a few firms set prices and face significant entry
barriers. A monopoly features one firm controlling prices and the market, with very high entry
barriers. Perfect competition is most advantageous for consumers due to its low prices and high
level of competition.
6.Current Market Trend:
Analyze a current market trend, such as the rise of e-commerce platforms, the gig
economy, or the impact of globalization on market structures. Discuss how this trend is
influencing one or more of the market structures mentioned above.
The rise of e-commerce platforms is reshaping market structures by enhancing competition and
lowering entry barriers. In monopolistic competition, e-commerce fosters product differentiation
and increases consumer choice, leading to more firms operating online. In oligopoly, traditional
companies face new competition from digital platforms, which may affect pricing strategies.
This trend boosts efficiency and reduces prices, offering consumers more options and
convenience.

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YASMIN FERNANDA PREPICHINI

Describe the characteristics of a perfectly competitive market. Why is it considered the

6.Current Market Trend:

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