Question

Give at least one example of a firm that operates in each market structure:

• perfect competition
• monopolistic competition
• oligopoly
• monopoly

Explain briefly the reasons for your selections (relate to 4 major criteria for the classification of market structures). You may offer an example of the specific firm or the type of a firm (for example "Microsoft" or just a "software maker").

Answer 1

Monopoly: It is a kind of market in which there is only one producer and many buyers. He has all the power in the market as the product is unique and the substitute is not available. The best example of monopoly is IRTC (Indian Railways Catering and Tourism Corporation), the organization comes under Indian government and although there are other modes of transportation available there is no substitute for railway. It is used for transportation of people and freight, IRCTC has all rights to decide the price and services provided by them.

Oligopoly: It is a kind of market type where there are only few firms who produce and sale similar products. In this, firms may form cartels to enjoy greater power over the pricing and profits. Best example of this market type would be OPEC (Organization of the Petroleum Exporting Countries), this organization is formed by a few oil producing countries to practice greater power and benefits. All these countries produce and export oil and to avoid price wars and exploitation they joined hands.

Monopolistic Competition: This is the most common type of competition that exists in all markets. There are many producers and many consumers; all producers produce a similar type of product which is differentiated by its features. Best example would be Smartphone producers, there are many firms (Samsung, Xiomi, OnePlus, Apple, Motorola, Nokia, etc) providing a similar product which is differentiated by some feature like color, size, camera type, OS, etc.

Perfect competition: It is a type of market where there are many firms and many buyers, all the firms work under an industry which decides the price. Producers have no power over the price and nor do the consumers. Perfect competition is a fictitious market type but it can be observed in agriculture market (vegetable and fruit sellers) they all may come together and a higher authority may decide what the price will be for a particular product.