Question

Provide examples of businesses / organisations that operate in each market structure of China's economy—perfect competition, monopolistic competition, monopoly and oligopoly. and write brief statements on how you can tell they are part of those market structures. (350 Words)

Answer 1

Ans- 1) Perfect competition- Perfect competition is a situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. Perfect competition is an idealized market structure that does NOT exist in the real world. While some real world industries might come relatively close to one or two of the four key characteristics of perfect competition, none matches all four sufficiently that they can be declared PERFECTLY competitively. Possible examples of markets that come close to Perfect Competition:

Ebay / Taobao sellers

Agricultural markets

Other informal markets

Foreign Exchange

Some forms of gambling

Stock markets

These all are close to perfect competition,but not exactly perfect competition because in real world there is no such market exist.

2) Monopolistic competition- Monopolistic competition characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors. It is represented by substitutes as there are no close substitutes are available.

Alibaba group, tencent are some examples that are Monopolistic in nature as there are no close substitutes are available for these type of organisation.

3) Monopoly- A market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. He enjoys the power of setting the price for his goods. The monopoly firm is a price maker. For example- IOS created its monopoly due to which only iphone sells IOS.

In the oil industry, China National Petroleum Corporation (CNPC), China Petrochemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC) operate franchises to carry out explo- ration and development of onshore and offshore oil and gas. They operate as monopoly as there is no other corporation or organisation that can enter into oil industry.

4) Oligopoly- Oligopoly is a competitive situation in which there are only a few sellers (of products that can be differentiated but not to any great extent); each seller has a high percentage of the market and cannot afford to ignore the actions of the others.

An Internet oligopoly is forming among Chinese Internet enterprises, with Baidu Inc, Tencent Hodingd, Ltd, and Alibaba Holding Group, Ltd, taking up 70 percent of the total market value of all listed Internet companies in China.