Overview: Market structure can be defined as the interconnected characteristics of a market.
- A specific area of buyers and sellers.
- One particular commodity.
- Presence of buyers and sellers.
- One price of a product.
A type of imperfect competition in which many producers sell products that are differentiated from one another. It's basically a a midpoint between perfect competition and total monopoly. This is very common in free market economies.
- Freedom to enter and leave the market
- No specific barriers to entry
- There is enough differentiation to create diversity, choice, and utility.
- Generates unnecessary waste
- Productively inefficient in the short and long run.
Where there is limited competition and the market is shared by a small number of producers and sellers.
- Large firms are able to make huge profits
- Dominant market players make long-term profits
- Customers can easily make price comparisons.
- Price settings can be highly disadvantageous for consumers.
- It is difficult for new firms to enter the market.
- Firms cannot make independent decisions otherwise they risk significant losses.
The scenario in which a specific person or business is the only supplier or seller of that product.
- Domestic monopolies can become dominant in their own territory.
- Innovation is more likely with large enterprises.
- Monopolies are protected from competition because their are barriers to entry.
- Profit are often invested in new technology.
- Society is burdened with higher prices.
- Restricts choice for consumers.
- Reduces economic welfare.
- Reduces consumer sovereignty.
Natural Monopoly: This type of monopoly occurs when an industry finds it most sufficient for production to be permanently concentrated in a single business concern rather than competitively contesting.
Geographic Monopoly: This type of monopoly occurs when one company or business is the sole provider in a certain area or region. This is often seen within phone and internet providers.
Technological Monopoly: This monopoly focuses on the controlling the manufacturing methods and hold rights over that manufacturing.
Government Monopoly: Occurs when a government cooperation is the main provider of a particular good or service.