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Market structures are grouped based on various characteristics, this include; the number of firms in the industry , similarity in good or service offered by firms in the industry and ease of entry into the industry by new firms. The four main market structures that may exist in…
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Market Structures Assignment Market structures are grouped based on various characteristics, this include; the number of firms in the industry , similarity in good or service offered by firms in the industry and ease of entry into the industry by new firms. The four main market structures that may exist in the economy are perfectly competitive markets, competitive monopolistic, oligopoly, and monopoly markets.
The short run profits in competitive markets are realized at a point where the marginal costs are equal to the marginal revenue. Due to the ease of entry in the competitive market, the firms cannot sustain economic profits in the long run (Graph A1 and A2). This fact is illustrated in the medical field in CT scan services. The CT scan machines were offering the same product and in the long run, they became unprofitable venture. This is due to the prices declining as many identical products are continually being introduced in the market. Farmers’ market is a good example of competitive market structure (Hubbard, p450).
Competitive monopoly on the other hand has dominating firm(s) that control prices unlike in perfect competitive markets. Both market structures have many buyers and sellers and the entry to these market systems are considerably similar. The entry to the both market structures is significantly easy. The only difference is the product being sold. In competitive market, the products are similar in all aspects while in competitive monopoly, the products are differentiated. Starbucks and other coffee houses compete in a competitive monopolistic market structures. They offer the same products but adequately differentiated (Hubbard, p465). Competitive monopolistic firms also offers prices that are greater than their marginal costs. In the short run, competitive monopolistic firms should have marginal revenue below its demand curve to realize profits. In the long run, competitive monopolistic firms make profit if their total revenue is greater than their total costs (Graph B1 and B2).
Oligopoly differs from competitive monopoly and competitive market structure in the ease of entry. Entry into oligopoly market structure is considerably hard because of the barriers of entry present in the market. Companies like Microsoft and Google fall in this category. New firm venturing into this market experience stiff competition among other barriers and its survival is barely minimal. This because, Microsoft and other firms in this market structure have economies of scale and there are also several governmental imposed barriers to such entry . The prices in oligopoly can only be analyzed using game theory. Firms in this market system alter their prices in relations to their competitor’s prices (Hubbard, p475).
Monopoly market is characterized by one seller and many buyers. Monopolistic firms are brought about by several factors including;
I. Government regulations on the number of firms into a certain market.
II. One firm has absolute control of the key resources necessary in production.
III. Network externalities in supply.
IV. Natural monopoly due to huge economy of scale.
Monopolies control their prices and supply. Firms like Time Warner and De Beers Diamond companies are examples of firms that were monopoly. Perfect competitive market differ with monopoly in that, a monopoly will produce less quantities and charge higher prices than a perfect competitive firm producing the same good. Monopoly is similar to oligopoly in entry of new firm in the industry. Entry in this structures as stated earlier is almost impossible (Hubbard, p485).
Graphs
Graph A1
Graph A2
Graph B1
Graph B2
Graph C
Graph D1

Graph D2
Works Cited
Hubbard, R. Glenn, and Anthony Patrick Brien. Microeconomics. 4th Ed., International ed. Harlow: Pearson Education, 2013. Read More
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