4 Types Of Market Structures

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What are the key features of the four types of Market Structures we have studied? Explain in what respects do they differ. Where necessary provide examples to your answer.

The four types of market structures that we have studied are perfect competition, monopolistic competition, monopoly and oligopoly. These categories have been made to help people understand how businesses operate and how prices, outputs and profits are determined. The four market structure types are there mainly for the purposes of organization.

Perfect competition is an ideal state of economic affairs which does not exists in any industry. A perfect competitive industry has multiple firms selling the exact same product. The number of firms is large so that no single firm can influence price and the products are so similar that the consumer has no reason to choose one for another. Two factors that are necessary in perfect competition are perfect knowledge and perfect mobility. Perfect knowledge is when everyone is aware of every economic opportunity. Perfect mobility is when there would be no barriers such as certain licenses and patents for a firm to pursue there goals and sell a product.

A perfect competitor has a horizontal demand curve that is perfectly elastic. This is important because it means that a firm would not have to lower a products price to sell more units of that product thus enabling the firm to sell as many units as they want to at market price.

Monopoly is a form of imperfect competition. It occurs when a firm produces all of the output in an industry. Some examples of monopoly are DeBeers diamonds and electric companies. One major difference between imperfect competition such as monopoly and perfect competition is the demand curve is no longer perfectly elastic. The demand curve goes downward to the right in imperfect competition. In monopoly, firms built barriers to keep competing firms from producing si... Continue Reading