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Market Structures

The document outlines the four main types of market structures: Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition, detailing their characteristics, such as the number of firms, product differentiation, and pricing control. Perfect Competition features many firms with identical products and no price control, while Monopoly has a single seller with significant price control. Oligopoly involves a few large firms that may collude, and Monopolistic Competition consists of many firms offering differentiated products with some price control.

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8 views15 pages

Market Structures

The document outlines the four main types of market structures: Perfect Competition, Monopoly, Oligopoly, and Monopolistic Competition, detailing their characteristics, such as the number of firms, product differentiation, and pricing control. Perfect Competition features many firms with identical products and no price control, while Monopoly has a single seller with significant price control. Oligopoly involves a few large firms that may collude, and Monopolistic Competition consists of many firms offering differentiated products with some price control.

Uploaded by

jayden.caby2020
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Market

Market structure refers to the


ructure
characteristics of a market, such
as the number and size of firms,
the degree of product
differentiation and the ease of
entry into and exit from the
market.
The Four Main Types of Market Structures:

Perfect Competition

Monopoly

Obligopoly

Monopolistic competition
Perfect Competition

A hypothetical market structure in which there are


very many firms, each of which represents an
infinitesimal share of the market. In a perfectly
competitive market, if any firm is able to earn an
economic profit, other firms will immediately enter
the market, driving economic profit to zero.
Monopoly

A market structure characterized by a single seller,


selling a unique product in the market. In a
monopoly market, the seller faces no competition,
as he is the sole seller of goods with no close
substitute.
Obligopoly/Cartel

Obligopoly firms join a cartel to increase their


market power, and members work together to
determine jointly the level of output that each
member will produce and/or the price that each
member will charge. By working together, the cartel
members are able to behave like a monopolist.
Monopolistic Competition

A type of market structure where many companies


are present in an industry, and they produce similar
but differentiated products. None of the companies
enjoy a monopoly, and each company operates
independently without regard to the actions of
other companies.
Market Number of Types of Freedom of Control on Real Life
Structure Buyers/Sellers Goods Entry/Exit Price Example

Perfect Many small Identical/ Free entry/exit No control, Agricultural


Competition firms, price homogenous price Commodities
takers determined by
market
Monopolistic Many firms, Similar but Relatively free Some control, Restaurants.
Competition some product differentiated entry and exit firms can set Clothing store
differentiation own prices

Oligopoly Few large firms, May be High barriers Firms have Automobile
interdependent differentiated to entry and significant industry,
or homogenous exit control, prices airlines
influenced by
competitors
Monopoly Single firm. No Unique product Very high Full control, Public utilities,
close substitutes barriers to sets price Microsoft
entry Windows OS
PERFECT COMPETITION
1. Number of buyers and
sellers: There are many buyers
and sellers in the market. Each
seller sells a small portion of
the total market supply. 2.
Types of goods: The goods
offered by different sellers are
homogeneous and identical,
making them perfect
substitutes for each other. 3.
Freedom of entry and exit:
There is complete freedom of
entry and exit from the market
for firms. No significant
barriers to enter or leave. 4.
Control on price: Individual
firms have no control over the
market price. The price is
determined by the forces of
supply and demand, and firms
are price takers. 5. Real life
example: Agricultural markets,
such as wheat or corn markets,
where many farmers sell
identical products
Monopolistic
Competition
1. Number of buyers and
sellers: There is only one seller
in the market, and many
buyers. 2. Types of goods: The
good or service provided by
the monopoly has no close
substitutes. 3. Freedom of
entry and exit: High barriers to
entry exist, which can be due
to legal, technological, or
resource constraints. 4.
Control on price: The
monopolist has significant
control over the price since it
is the sole provider of the
good or service. 5. Real life
example: Utility companies,
such as electricity and water
providers in certain regions,
where a single firm
dominates.
Oligopoly
1. Number of buyers and
sellers: A few large sellers
dominate the market. There
are many buyers. 2. Types of
goods: The goods may be
homogeneous (e.g., steel,
aluminum) or differentiated
(e.g., cars, smartphones). 3.
Freedom of entry and exit:
There are significant barriers
to entry, which might include
high startup costs, access to
technology, or strong brand
identity. 4. Control on price:
Firms have some control over
prices, but they are
interdependent. Actions of
one firm affect the others,
leading to potential price
collusion or competition. 5.
Real life example: The
automobile industry, where a
few large companies dominate
the market (e.g., Toyota, Ford,
Volkswagen)
Oligopoly
Cartel: An oligopoly can
sometimes lead to the
formation of a cartel,
where firms collude to
control prices and
production to maximize
collective profits. Example
of a cartel: OPEC
(Organization of the
Petroleum Exporting
Countries), which
coordinates petroleum
policies among member
countries.
Monopolistic Competition
1. Number of buyers and
sellers: There are many buyers
and sellers, but not as many as
in perfect competition. 2.
Types of goods: Products are
differentiated, meaning each
firm offers a product that is
slightly different from others.
3. Freedom of entry and exit:
There is relative freedom of
entry and exit from the
market, though differentiation
and brand loyalty can create
minor barriers. 4. Control on
price: Firms have some control
over their prices because their
products are differentiated.
They can influence demand
through advertising and brand
management. 5. Real life
example: The restaurant
industry, where numerous
restaurants offer similar but
not identical dining
experiences.
Perfect Competition:
Agricultural Commodities

Monopoly:
Restaurants
Obligopoly:
Airlines

Monopolistic Competition
Public Utilities
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