Select an industry that belongs to any one of the four market structures-perfect competition, monopoly,monopolistic competition,...

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 of firms,type of product,entry/exit barriers,market power.
Explain your reasoning and provide the rationale of your answer?

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Expert Solution

The online shopping industry is the best example of perfect competition market structure. Perfect competition is the market where the numbers of buyers and sellers are usually high. The products offered by the perfectly competitive market will be almost same with similar price. The entry barriers are very less in perfect competition.

NUMBER OF FIRMS

Under perfect competition market the number of sellers is very high compared to other market structures. In the similar way in online shopping platforms there are number of players. Online shopping is a trend in the modern society. Firms are able to increase the sales using online marketing. Thus in accordance with the increasing opportunity the online marketers also increased. Therefore there is larger number of buyers as well as sellers in online shopping platform.

TYPE OF PRODUCT

The another major feature of perfectly competitive market is that the products offered in the market will be similar to each other. In the case of online shopping industry the firms like Amazon, flipchart, barns & noble and water stones are working as book stores. The books offered by all these firms are similar. In the same way in the area of fashion and style, stationary etc also there are numbers of firms. And goods offered by these players will be similar to each other with almost similar prices.

ENTRY AAND EXIT BARRIERS

In perfect competition all the firms have the complete freedom to enter into the market and also to leave the market at any time. The entry barriers will be very low in perfectly competitive market. Online shopping industry has the same feature. Any firms can enter and leave the market at any time. There are no barriers to start an online business. Any firm can start an online business and stop the business as they wish.

MARKET POWER

The term market power refers to the ability of a firm to decide the price. In the case of perfectly competitive market the firms are considered to be price takers. There is large number of sellers so that the firms should take the price prevailing in the market. In online shopping industry also a firm cannot decide price as the firm wish. The market power of firm is very less. It is because the number of players in online shopping industry is very high today. Thus is a charges high price for its goods the consumers will purchase from another firm though they have many other options. Therefore all the firms are price takers in perfect competition. And they have only less power in market.

In nut shell all the features of perfect competition and online shopping industries are the same. Thus it can be said that the online shopping industry is the best example of perfectly competitive market.

Rahul Sunny answered 1 year ago

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