Question

What market structure best describes the environment within which your organization operates? What challenges and opportunities would arise from higher and lower degrees of government intervention? (A federal bank )

Answer 1

My current job is for the federal bank so the market structure environment is a little different. I would instead like to talk about my previous job where I worked for a medical device company. This market structure was monopolistic competition. “Monopolistic competition builds on the following assumptions:

(1) All firms maximize profits.

(2) There is free entry, and exit to the market.

(3) Firms sell differentiated products.

(4) Consumers may prefer one product over the other”.

There are a number of firms who compete against each other, who have slightly different products. This organization provided medical equipment and machines that met industry standards and capabilities. Although many companies could provide some type of this equipment, there were only a few that could provide to the level and capability hospitals required. This allowed us to charge higher prices. A lot of hospitals preferred our products because we teamed with a software company to provide machines that were interoperable with each other so nurses and doctors could use any machine to access their patients.

The Government has rules in this market due to socio-economic factors. These machines had to be regulated because many housed medication. We also had many devices that helped patients breathe like ventilators. If these products were not regulated by the Government, companies could take shortcuts and that could be disastrous to patient’s health or even cause death.

A challenge the Government could implement in this type of market structure is by setting price ceilings. This type of company, because it largely drives pricing, would be hurt by price ceilings. They would not be able to generate the profit they are hoping if the Government regulates their prices. This could be extremely detrimental since price ceilings are usually implemented to be less than the free-market equilibrium price.