Characteristics of the Various Market Structures

Characteristics of the Various Market Structures

Characteristic of the various market structures al affiliation) The structure of the market affects how output and price decisions are made by the business organizations in their respective structures. The intention of a market structure is to minimize losses and maximize profits (Panitz, 2008).Perfect competition Monopolistic competition Oligopoly Monopoly Number of firms Many firms Many Few numbers of firms for example fiveonly one firm Pricing decisions Price controlled The firm decides on the price without concern of the rival firm Price not controlled The firm decides the price due to lack of competition Output decisions profit Normal profits Normal profit likelihood in the long term Supernormal profits when price is increased Supernormal profits Demand curve Perfectly elastic Elastic Price elastic for price increase and inelastic for price cut Price inelasticEase of entry There is freedom of entry There is ease of entry Barriers are present Barriers are present Product differentiation Homogeneous products Firms have differentiated products Homogeneous / differentiated No substitute for services and goods Most firms which are state owned are monopoly since they prevent entry of other players into the market. In the United States of America, people buy automobiles from different firms. In such kind of a market, there are few sellers and many buyers hence the competition become high. Restaurants are among the examples of monopolistic competition. Although the firms may be producing products of similar recipe, the branding may vary from firm to firm. Monopolistic competition comprise of many sellers and many buyers (Weigand amp. Rachman, 2010). The product is almost the same but the branding is different resulting to a fierce competition. Other examples include private schools and insurance brokers and hairdressers. The firms that deal with sell of vegetables and food are good examples of perfect competition even though they may change to oligopoly in situations where branding sets in. Market structure graphs Perfect competition COST MC AC SALES The price in a perfect completion market structure is the same. The sellers do not have control over the price and the buyers have knowledge on the products sold. Monopolistic competition They often have a slight price control as a result of being able to differentiate their products in some ways. COST MC AC SALES Oligopoly Prices may be stable in the number of firms’ current in the market structure. Goods may be differentiated or homogeneous. Firms in this type of structure may often be influenced by the behaviors of others. PRICE Elastic Inelastic QUANTITY Monopoly MC ACCOST SALES Due to lack of completion, the price is often high leading to supernormal profits. The firm decides the price due to lack of competition.Marginal analysis Firms have a mandate of achieving their goals by maximizing profits and minimizing loses. Production is usually increased until the marginal cost equals the marginal revenue. Output should be produced at a level that is considered maximum depending on whether the type of structure is monopolistic, monopoly, oligopoly and perfect competition. Pricing decisions tend to rely on analysis regarding marginal contributions to costs and revenue. Marginal profit appears positive when marginal revenue is more than marginal costs (Vaile, 2007). Reference Panitz, E. (2008). Strategic types and growth strategies used by public accounting firms. WSMQ, 13(1), 135-143. doi:10.1080/15332969.1995.9985210Vaile, R. (2007). Efficiency within the Marketing Structure. Journal Of Marketing, 5(4), 350. doi:10.2307/1245547Weigand, R., amp. Rachman, D. (2010). Marketing Strategy and Structure. Journal Of Marketing, 39(1), 120. doi:10.2307/1250821

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