In: Economics
Nick runs a small business conducting online economics tutorials. He has recently noticed a large influx of competitors to this market. There are now over 50 companies conducting online economics tutorials in Melbourne alone, each with their own technology and style of teaching. What kind of market structure is this? Make sure you examine each of the characteristics of market structure in your answer. Explain whether the government should be worried about any aspects of this market structure. How can the government address these concerns?
Nick runs a small business conducting online economics tutorials where there is a large influx of companies conducting online economics tutorials in Melbourne alone, each with their own technology and style of teaching. This is an example of a Monopolistic market structure.
A monopolistic market structure is a market where there are a large number of buyers and a large number of sellers and they are price makers because they can distinguish their own product in terms of their own brand name, quality, advertisements, etc. There is free entry and exit in this type of market structure.
Other types of market structures are:
Perfect Competition - In this type of market there are a large number of buyers and a large number of sellers with freedom of entry and exit. The sellers are price takers because they sell perfectly homogeneous products.
Monopoly - In this type of market there is only a single seller and a large number of buyers. The single seller sets his own price which means he is a price maker because he does not face competition from any close substitutes. There is restrictions on entry and exit in this market.
Oligopoly - In this type of market there is few sellers and many buyers. The few sellers sell homogeneous product and they are price makers because only the few sellers have control over the whole market. There is restrictions on entry and exit.
In Monopolistic market structure, which is the case here, in your question, I do not think there are many aspects the government should be worried about because there is a healthy competition among many sellers, except that some of the sellers can misguide consumers by providing false advertisement.
The government can address these concerns by strictly following a quality protocol which needs to be maintained and also have a strict survellience system on these sellers.