Question

Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? In each case, justify your classification.

a. a supermarket in your hometown

b. the steel industry

c. a Kansas wheat farm

d. the commercial bank in which you or your family has an account

e. the automobile industry.

Answer 1

a) Supermarket: This is oligopoly or monopoly. This is because the hometown would be big or small, so depending on it there would be a few supermarkets or a single supermarket. This would mean that they exist in few number, sell homogeneous good.

b) Steel industry: This would be oligopoly market. This type of market sells homogeneous or non homogeneous good. Here steel is standardised on basis of quality measures.

c) Kansas wheat farm: This market is pure competition. This is because same quality of wheat is produced across the farms . Hence the wheat farm is pure competition.

d) Commercial bank where I have an account: Commercial banks are oligopoly or monopolostic in nature, depending on the number of banks that exist in a city. They provide similar services, though the rates of interest might differ.

e)automobile industry: This would be oligopoly. This is because in this market, there are few top players, who occupy the major shares of the market and control it.

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