Market Structure free essay sample

Economists classify the market in different ways. In the main, types of markets are examined in four categories which are ‘monopoly, oligopoly, monopolistic competition and perfect competition’. There are some major features that separate these types of markets. A monopoly is a structure in which a single supplier produces and sells a given product. (E. g. IGDAS, ISKI, OPEC) If there is a single seller in a certain industry and there are not any close substitutes for the product. Under monopoly there is no rival or competitors. Basically there are four features of monopoly. First one is strong barriers on the entry of new firms. As there is one firm no other rival producers can enter the market of the same product. Since the monopolist has absolute control over the production and sale of the commodity certain economic barriers are imposed on the entry of potential rivals. Secondly, under monopoly there are large numbers of buyers although the seller is one. We will write a custom essay sample on Market Structure or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page No buyers reaction can influence the price. Third one is under monopoly a single producer produces single commodities which have no close substitute. Monopoly can not exist when there is competition and lastly, in case of monopoly one firm constitutes the whole industry. The entire demand of the consumers for a product goes to the monopolist. In an oligopoly there are very few sellers of the good. The product may be differentiated among the sellers (e. g. automobiles, cell phones, gas and so on). This means that the small amount of sellers all tend to be aware of one another and what business decisions they are all making. Since there are few numbers of firms of producing a given product, there is competition into production of quality products and services. There is availability of information is a little bit easy in terms of costs as compared to a monopoly market structure. In such an industry there is easier entry and exit which is quiet better than that of monopoly which is blocked. Oligopolistic markets leave customers with less choice. Firms cannot take independent decisions and always have to consider the views of other dominant players in the market. New firms cannot enter to the market easily due to various barriers of entry. In perfect competition (sometimes referred to as pure competition), there are no barriers to entry into or exit out of the market. Firms produce homogeneous, identical, units of output that are not branded. Each unit of input, such as units of labor, is also homogeneous. No single firm can influence the market price, or market conditions. Firms are a price taker, There is no need for government regulation, except to make markets more competitive. There is also maximum choice for consumers. Monopolistic Competition is a market structure in which many firms sell products that are similar but not identical. There are many sellers hence firms compete. In addition there is product differentiation. Entry to the market easily makes zero economic profits. All firms are profit maximizers and they all have some market power, which means none are price takers. Examples of monopolistic competition: Books, CDs, movies, computer software, restaurants, furniture, and so on. To sum up; monopoly, where there is only one provider of a product or service. Oligopoly, in which a particular market is controlled by a small group of firms. Perfect competition, there are many firms making a homogeneous product. Monopolistic competition, there are plenty of independent firms that share the market.