Market Structures Essay Example | Topics and Well Written Essays - 500 words

Market Structures - Essay Example There are many firms. Each firm owns a percentage of the total market share. Furthermore, products are differentiated in pricing strategies, style, brand name, advertisement, and packaging. Here are no barriers to entry and exit. Monopoly There is a single seller such that the industry and firm are synonymous. Monopoly markets have unique services and products that do not have close substitutes. The firm in a monopoly market is the price maker and has considerable control over the price as it can control the supply of the product. Monopoly markets have barriers to entry and exit. Oligopoly There few large firms with each firm considerate of their rivals’ decisions and reactions to its decisions regarding output, advertising, and prices. Products in an oligopoly market are differentiated. There are barriers to entry in this market due to the requirement of huge capital investments and economies of scales. Demand Perfect Competition Individual firms in a perfectly competitive ma rket view their demand as perfectly elastic that is a horizontal line at the market price level. However, the industry demand curve is not perfectly elastic. The demand curve is perfectly elastic for individual firms because they are price takers regardless of the quantities they produce. This explains why the demand curve for firms in a competitive market is a horizontal line at the market price. Monopolistic The demand curve of firms in a monopolistic market is highly elastic, but not perfectly elastic.