What are Market Structures?
A market structure is an economic model of competition among businesses in the same industry
A monopoly occurs when there is only one seller of a product that has no close substitutes. Monopolies include only one seller, control of prices, and restricted, regulated market.
- Consumers don't have to worry about competition
- People can go to one company for everything
- Without competition there is no desire to improve quality, service, or pricing
- Monopolistic companies become the price makers of a product
- Lack of advances in technology
Types of Monopolies:
- Natural: A monopoly in an industry where a single company has a monopoly because there is no need for competition
- Technological: A monopoly that only occurs when a single company has exclusive rights over a specific piece of technology
- Geographical: A monopoly that occurs because there is only one company in the area that provides a service
- Government: A monopoly that only takes place when the government assigns certain companies a job in specific regions, such as WM
An oligopoly is a market structure in which only a few sellers offer a similar product. In today's modern world, the cell phone industry is a huge oligopoly, with companies such as Sprint, Verizon, and AT&T, all offering a similar product
- Consumers get to choose which producer they get to buy from
- Prices are generally fixed so producers can't charge too much
- To produce the cheapest product, quality often drops
- Large companies often dominate markets that used to be dominated by many, smaller companies or business
Monopolistic competition occurs when many sellers offer similar, but not standardized, products. Monopolistic competition includes many sellers and many buyers, similar but differentiated products, limited control of prices, freedom to enter or exit market, and applying economic concepts.
- Consumers get the lowest price
- Companies strive to have the best product
- Customer service generally improves
- Smaller companies often copy a product and then can sell it for cheaper
- Detrimental to the environment