Compare and contrast the 4 market structures. Include in your answer any differe

Question

Compare and contrast the 4 market structures. Include in your answer any differences in elasticity of demand, level of competition, comparative size of firms, how price is determined, price level, type of product and any other unique qualities/ characteristics of those market structures. Give an original examples of each market structure. Do no use any that have been used in the videos or readings. I am looking for thorough answers.

Number the market structures from 1 - 4 and use a separate paragraph for each. It is ok to use bullets and incomplete sentences to list the characteristics as long as I can understand what you are saying.

Explanation / Answer

The 4 market structures are namely Perfect competiton, Pure Monopoly, Monopolistic Competition and Oligopoly.

1. Perfect Competition: This market structure comprises of large number of buyers and sellers so that no individual firm or buyer have any influence over price. The firms in this market produces homogenous or identical products. The firms have a small market share. Firms in this market have the freedom of entry and exit. They face a perfectly elasticity of demand. The price is determined at the level where price equals marginal cost of the firm. There is no selling cost. Example of such a market is the market for agricultural goods.

2.Monopoly: This market structure has only seller and many buyers. The presene of one seller indicates that the monopolist has the market power to influence price of his goods. The monopolist produces goods that has no close substitutes. There is barrier to entry in such a market structure. Due to this the elasticity of demand faced by the monopolist is zero. The monopolist sets price where his marginal revenue equals marginal cost. The selling cost incurred is small. Example of such a market is railways.

3. Monopolistic Competition: The number of sellers are large and small enough not to have control over prices.They produce differentiated goods. They have the freedom to enter or leave the market. They do not hold large market share. The demand elasticity faced is therefore less elastic. The price is determined at the level where marginal revenue equals marginal cost.The selling cost incurred is large. Example of such a market is restaurant business.

4. Oligopoly : It comprises of few firms. The firms produce both homogenous and differentiated goods. The entry of firms in this market is restricted.  The demand elasticity faced is therefore less elastic. The price is determined at the level where marginal revenue equals marginal cost. Example of such a market is telephone business. The selling cost incurred is small.

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