Market Structures Morgan Schettler

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Monopolistic Competition

Some Control over Prices = Because producers their brands, they also have some control over prices. However, because products from different producers are close substitues, this market power is limitedd. If prices rise too much, customers may shift to another brand. In addition, there are too many producers for price leadership or collusion to be feasible.

Few Barriers to Entry = Start Up clst are relatively low in monopolistically competitive markets. This allows many firms to enter the market and earn a profit.

Differentiated Products = Firms in this type of market engage in product differentiation, which means they seek to distinguish their goods and services from those of other firms, even when those products are fairly close substitues for one another.

Many Producers = Monopolistically competitive markets have many producers and sellers.

Oligopoly

Some Control Over Prices = Because ther are few firms in an oligopoly, they may be able to exert some control over prices. The firms are influenced by the price decisions of other firms in the market. This interdependence between firms in setting prices is a key feature of oligopoly.

Similar Products = Offer essentially the same product, with only minor variations. Example Light bulbs are all very similar, tey just come in different shapes and sizes.

Few Producers = The proportion of the total market controlled by a set number of companies is called concentration ratio. For example, four firm concetration ratio in the light bulb industy is 89 percent.

Market Failures

Positive Externality - On the other hand is a benefit that falls on someone other than the producer or consumer. If you enjoy hearing the music from a neighborhood party, that spillover sound is a positive externality.

Negative Externality - Is a cost that falls on someone other then the producer or consumer. This cost may be monetary, but it may also simply be an undesired effect.

Extermality - Is a side effect of production or consumptionthat has consequences for people other than the producer or consumer.

Perfect Competition

No Control Over Prices = Uder conditions of perfect competition, producers have no market power. They cannot influence prices because there are too many producers offering the same product. Producers are said to be price takers beacause they must accept, or take, the market price for their product.

Easy Entry into the market = In a perfectly competitive market, producers face few restrictions in entering the market. Ease of ensures that existing producers will face competition from new firms and that a single producer will not dominate the market.

Identical Products = Products in perfectly competitve markets are virtually identical. A product that is exactly the same no matter who produces it is called a commodity. Examples include grains, cotton, sugar, and crude oil.

Many producers and consumers= Having a large number of participants in a market helps promote competition.

Monopoly

Substantial control over prices = Monopolistic firms usually have great market power because they control the supply of a good or service. Unlike competitive firms, monopolistic businesses are price setters rather than price takers.

High Barriers to Entry = The main factor that allows monopolies to exist is high barriers to entry that limit or pervent other producers from entering the market.

Unique Product = A monopoly provides the only product of its kind. There are no good substitutes, and no other producers provide similar goods or services.

One Producer = There is no competition in a monopoly. A single producer or firm controls the industry or market. Monopolistic firm is industry.