The Different Market Structures

Monopolistic Competition

Overview

Many sellers who are selling slightly different products. Many smaller businesses operate under monopolistic competition.

Characteristics

1. There must be many buyers and sellers (but fewer sellers than in a perfect competition market)

2. Have similar products, but still have enough difference to market them, and make consumers have a preference.

3. The product differentiation gives producers some control over the price, but not a lot.

4. Freedom of entering and exiting markets, just like in a perfect competition market.

5.  Large amount of independent firms competing in the market.

Advantages

  • Easy to enter and leave the market
  • More efficient than a monopoly
  • The differentiation in products creates diversity in the market
  • Competition in quality to appeal to customers

Disadvantages

  • Still less efficient than perfect competition
  • Prices are high
  • Could result in too much diversity (waste)

Examples

  • Restaurants
  • Clothing stores
  • Grocery stores

Oligopoly

Overview

Market where there are a few markets, or a few monopolies that dominate the market.

Characteristics

  1. Few sellers many buyers
  2. Sells either standardized products (steel, or cotton), or differentiated products (cereal).
  3. The few firms have more control over the market and prices, but not as much as a monopoly.
  4. Less freedom to enter or leave the market

Advantages

  1. Very competitive between the few firms
  2. High competition leads to innovation
  3. Price stability
  4. Easy price comparison for consumers

Disadvantages

  1. Difficult for new firms to enter the market, and difficult for current firms to leave the market
  2. Uneven wealth distribution between the business
  3. Difficult for small businesses to survive
  4. Inefficient productivity

Examples

  • Kellogg, General Mills, Post and Quaker controlling the cereal market
  • Sony, Universal Music Group, Warner, and EMI controlling the music industry
  • Apple and Samung dominating the Smart Phone market

Monopoly

Overview

When a single company owns the market. Usually a large corporation that has no competition.

Different types of Monopolies & characteristics

Natural- Happens when it is most efficient for production to have one producer.

  1. High fixed costs
  2. Likely to be expensive if not regulated
  3. Becomes more and more efficient as the amount of consumers increase

Geographic- One producer dominates the market in a particular region.

  1. Often exists in areas with little buyers, but still enough to make a profit
  2. Often a small business

Technology- Often the result of a patent from a company has the sole right to produce that product (assuming there are no substitutes that can compete with it)

  1. Usually temporary
  2. Little substitutes to that product being produced

Government- A government business that is the only one that is permitted to provide that product/service.

  1. High regulations
  2. Run/influenced by the government
  3. Not every efficient or competitive

Advantages of Monopolies

  1. Increased output leads to lowered production cost
  2. Highly profitable for the company, could be used for innovation

Disadvantages of Monopolies

  1. Little competition
  2. One company has ultimate control of production and prices
  3. Difficult for new businesses to enter the market

Examples

Natural- Utility companies

Government- U.S. postal office for 1st, and 3rd class mail, and sewage companies (the government only contracts with one in each area)

Technology- Microsoft Windows

Geographic- A single grocery store in a small town

Sources

Comment Stream

2 years ago
0

The thing I noticed the most right out the gate was that these weren't standard textbook definitions. Great choice in pictures you used as examples, since they were so clear that there was no need to explain it.

2 years ago
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I honestly enjoyed the picture at the beginning. There are so many restaurant's displayed (reminds me of when I tried to display cereal mascots for my pictures). I also like the organization displayed in the site, I feel like mine wasn't so organized.

2 years ago
0

The images were suitable for the information provided.

2 years ago
0

I like that your information gets straight to the point. The pictures are very nice too.

2 years ago
0

I think you could've used a few more pictures just to break things up a little

2 years ago
0

I liked the cluster of pictures at the beginning, also your information was quick and too the point, good job!😛

2 years ago
0

I loved the fist image you had! You have an extensive amount of information and it was very informative!

2 years ago
0

I like your pictures but at the beginning it was a little off putting that there were two large imagines so close to each other 🐋