there are three imperfectly competitive market structures under which, the vast
ID: 1246005 • Letter: T
Question
there are three imperfectly competitive market structures under which, the vast majority of business operations fall. The market structures are monopolistic competition, oligopoly, and pure monopoly.describe each structure in terms of the types of products or services produced, number of firms competing in each structure (few or many), barriers to entry into the structure (high, moderate, or low), and how much control do firms in each structure have over price. Offer examples of companies classified in each.Explanation / Answer
In a monopolistic competition, the products are a bit more differentiated than in perfect competition. Perhaps some firms can get a very little advantage over making their item a bit different than the other firms. However, the products can still be substituted by products of another firm. There are a large number of firms competiting in this market structure, and the barriers to entry are low. The firms have a degree of control over price, but are still price takers for the most part. Examples of this would be the cereal industry, the clothing industry, or restaurants. In an oligopoly, there are only a few firms in the market. The products it sells could be standardized or differentiated. (think of standardized like steel or air travel and differentiated like cars) The barriers to entry are high in oligopoly (since it's most likely something that requires a huge startup cost), and firms in oligopoly are price setters and not price takers. Some examples are automobile (Ford, Chrysler, GM, etc) and air travel (Delta, Continental, Southwest, etc) In a pure monopoly, there is only one firm in the market. There is absolute product differentiation in the market since the monopoly is the only firm that produces that good, and thus consumers can't substitute for other goods. The barriers to entry are high. Monopolies also have control over the market price as they are a price setter and there are no other firms in the market. There really aren't many pure monopolists examples, as antitrust laws tend to break them up. But take SAQ, a corporation in Quebec that controls the sales of alcohol. They are the only supplier of alcohol in that area. It's not the greatest example since they are government owned, but pure monopolies are pretty rare now days. (there are historical examples though, like Standard Oil, the East India Trading company, etc)
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