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Four Market Structure Essay

1481 words - 6 pages

I. Introduction to Four Market Structure
II. Comparative Characteristics of Four Market Structures
III. Four Market Structures
a. Pure Competition
i. Characteristics
ii. Demand Curve
iii. Examples
iv. Summary
b. Pure Monopoly
v. Characteristics
vi. Demand Curve
vii. Examples
viii. Summary
c. Oligopoly
ix. Characteristics
x. Demand Curve
xi. Examples
xii. Summary
d. Monopolistic Competition
xiii. Characteristics
xiv. Demand Curve
xv. Examples
xvi. Summary

FOUR MARKET ...view middle of the document...

Table 1.1 shows the comparative characteristics of 4 market structures; pure competition, pure monopoly, oligopoly and monopolistic competition based on the distinguished features such as the number of seller, the extent of product differentiation and the example of products, the ease of entry and exit in the industry and the pricing structure as shown by the demand curve firm.

NUMBER OF SELLER | Very large number of small sellers | One seller | Few sellers | Many seers acting independently |
TYPE OF PRODUCT | Homogeneous | No close substitute | Homogeneous; others differentiated | Products are differentiated |
ENTRY & EXIT | Freedom of entry and exit | Blocked entry | Difficult to enter | Relatively easy to enter |
CONTROL OVER THE PRICE | Price taker | Price setter (price discrimination) | Can control the price (collusion or price war) | Can dictate the price |
DEMAND CURVE | Perfectly elastic | Relatively inelastic | Kinked curve | Relatively elastic |
NON-PRICE COMPETITION | Not necessary | To enlarge the market | Relatively important | Very important |
EXAMPLES OF PRODUCTS | fruits, vegetable, from agriculture | water and electricity, rains like PNR, LRT, MRT | gasoline, steel, cars, sugar, cement, airlines | soaps, shoes, dresses, candies, services of parlors and restaurants |
The above table shows the comparative characteristics of the 4 market structures; pure competition, pure monopoly, oligopoly and monopolistic competition.

A market structure characterized by infinite number of small sellers just like product in agriculture whose products are homogeneous.
The Essential Characteristics of Pure Competition are as follows:
1. There is an infinite number of independent sellers in the industry. A single seller is very small relative to the size of the market.
2. Products are homogeneous or identical, therefore, there is no reason for the firm to charge higher or lower prices compared to other firms in an industry. Buyers view the products of firm 2, 3 and 4 as perfect substitutes for the product of firm 1.
3. Freedom of entry or exit in the industry implies that there are no legal, technological, and financial obstacles that prevent other firms from entering the market. It is very easy for the firms to enter especially when firms that are already in the market are gaining profit or exit when the firms are incurring losses in the industry.
4. Product pricing is not dictated by any one seller or buyer but determined by the demand and supply condition. Buyers and sellers are price takers, thus, individual firms or buyers exert no control over the product price.
5. The demand curve for the industry is downward sloping but for a single firm in a pure competition, it is perfectly...

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