Describe the four basic types of market structures. Although there are many diff

Question

Describe the four basic types of market structures. Although there are many different examples of economies in the world, all of them demonstrate one or more of the four basic types of market structure.

1) For this assignment, in your own words, Identify the four basic market structures, in order, from the best for consumers to the being the best for producers.

2) Describe each in terms of their distinguishing characteristics (e.g., monopolies have only one producer). Make certain you describe how the characteristic distinguishes the associated market structure from other market structures.

********ANSWER PROBLEM 2 ONLY***********NO PLAGIARISM PLEASE************************

Explanation / Answer

2) There are certain types of market like perfect competition, monopoly, monopolistic competition and oligopoly. There exist many differences in their market structure which are shown below:

(i) Number of sellers : Under perfect competition and monopolistic competitive market, there exist large number of sellers while under monopoly, there exist only a single seller of the commodity. Oligopoly is a form of market where there exist few big sellers.

(ii) Entry and exit of firms : Under Perfect competition and monopolistic competition, firms are free to enter or exit the market but under monopoly and oligopoly form of market, there are barriers on the entry and exit of firms.

(iii) Control on the price : Perfectly competitive firms are price takers so does not have any control over the price of the commodity. Price is determined by the forces of demand and supply. Under monopoly, firm has full control over the price of the product as firm is the price maker. Monopolistically competitive firms also enjoys some control over the prices of the commodity as they sell differentiated products. In Oligopoly market, there is interdependence of firms over the price of the commodity.

(iv) Products : Perfectly competitive firms sell homogeneous products which are identical in all respects while monopolistic firms sell differentiated products for example: soap of different companies. Monopoly sell goods having close substitutes while oligopoly firms sell product with different brands.

(v) Level of profit in long run : Perfectly competitive firms and monopolistically competitive firms earns normal profit in the long run as AR = AC while monopoly earns super normal profit as AR > AC.

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