Market Structures

Authored by Destiny Maday

Overview:

Market structures are what keep track of competing businesses in the same type of industry.

Perfect Competition

Characteristics

  • There are numerous buyers and sellers
  • Sellers off a standardized product
  • There is freedom to enter/exit markets
  • Independent buyers and sellers.

Advantages & Disadvantages

Advantages
  • Consumers benefit
  • More efficient
Disadvantages
  • Very strict
  • Lack of product variety
  • Unequal distribution of goods and income

Monopolies

Characteristics

  • Only one seller
  • Can have control of prices
  • Restricted, regulated market

Types

Natural Monopoly- Only one firm can supply a market's entire demand of a good or service. An example would be Water Services. They have pipes that run through homes, business, and public facilities and regulates the water quality so it's safe for us to drink.

Government Monopoly-The government either owns and runs the business or has only one producer. An example would be the U.S Postal Service. They have the exclusive right to deliver mail.

Technological Monopoly-Exists only because the firm type of technology, invention, or method. An example would be Polaroid. Patents are a characteristic of a technological monopoly.

Geographic monopoly-Exists only because there are no other producers or sellers in that particular area. An example would be the professional sports team. The MLB or other any other major sports league require teams be associated with a city or region.

Advantages & Disadvantages

Advantages
  • Encourages innovation
  • Economies of scale can be gained
Disadvantages
  • Exploitation of consumer
  • Potential for supply to be limited
  • Potential for inefficiency

Monopolistic Competition

Sellers offer similar but not standardized products.

Product Differentiation and Non-price competition are features of this competition. Product differentiation is basically when the seller attempts to distinguish his product from the other similar products. Non-price competition when there are other factors considered than just the price to get customers.

Characteristics

  • Many sellers and buyers
  • Similar but differentiated products
  • Limited control over prices
  • Freedom to enter/exit the market

Examples

Advantages & Disadvantages

Advantages
  • Products are differentiated
  • No barriers to entry
  • More efficient
Disadvantages
  • Some differentiation doesn't create utility

Oligopoly

Is a market structure that is less competitive than a monopolistic competition. In this structure there is a large market share.

Characteristics

  • Few sellers, many buyers
  • Standardized or differentiated products
  • More control of prices
  • Little freedom to enter or exit market

Examples

Computer Operating Systems (Apple, Windows, Microsoft)

Advantages & Disadvantages

Advantages
  • Competitive strategy
  • Efficient in terms of innovation and new products
  • Price stability
Disadvantages
  • Cartel-like behavior reduces competition
  • Allocatively and productively inefficient
  • Barriers to entry

Resources

Classzone (textbook)
Google Images
http://economicsonline.co.uk/

Comment Stream

2 years ago
0

Lots of information and is well organized. Could use some references.

2 years ago
0

Easy to read and visually appealing

2 years ago
0

I like it! Maybe some more pictures but overall is great!

2 years ago
0

This was great!!! But I don't think you had to add Perfect Competition, I think you forgot to put your References but other than that, I LIKE IT

2 years ago
0

Very well organized with lots of good information. Everything about it is great. Good job. 😊