Question

• Select an industry that belongs to any one of the four market structures – perfect competition, monopoly, monopolistic competition or oligopoly. Explain why you think it belongs to your identified market structure based on the market characteristics
  • number or firms,
  • type of product,
  • entry/exit barriers,
  • market power

Explain your reasoning and provide the rationale for your answer.

Answer 1

Explanation : As we know that we have four market perfect competition , monopoly market , monopolistic market , oligopoly market .

  let take an example of SOAP INDUSTRY. WE, identity that Soap industry belongs to monopolistic market .

Following are the reasons which identify that Soap industry belong to Monopolistic market

• Number of firm : As we know in the monopolistic market , there is large number of sellers and buyers .

Similarly , in Soap industry there is large number of sellers . In soap industry also there is large no. of firm selling identical product that is soap.

• Type of product : In monopolistic market , the product are heterogenous in nature means firms are selling similar products but not identical .Product of one firm is different from another in size, colour, quality,packeging etc.

Similarly , in soap industry no. of firms are selling soap but one firm soap is different from another firm in case of size, colour, quality,packeging etc.So, soaps are similar product but no. of firm selling it are not identical.

• Entry\ exit barriers : In monopolistic market , there is freedom of entry and exit the firm.

Similarly ,in Soap industry , there is freedom of entry and exit the firm. If profit prevails any firm can enter the market and in case of loss any firm can leave the market.

• Market Power : In monopolistic market , the products of firm are different by Branding or Customization in function . Because of that product arenot identical .so, im monopolistic market , firm has control over the market or may charge price which he wants so, market power under monopolistic market is in hand of firms.

Similarly , Soap industry , the no. of firms soaps are different by Branding or Customization in function. And prices of all brand of soaps arenot equal,means they can charge their own price because of Branding or Customization in function.So, in Soap industry also, market power are in hand of firms.

Conclusion :So, from above reasoning and rationale we can say that soap industry is an example of monopolistic market.