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In: Economics

7. What are the four “Market Structures”? Please describe each Market Structure and give an example...

7. What are the four “Market Structures”? Please describe each Market Structure and give an example of a firm that belongs in each of the four Market Structures, preferably a firm that was not discussed previously. 8. What is a “natural monopoly”? Please give an example. 9. Why are natural monopolies often regulated by some sort of Government Regulatory Agency?   10. In YOUR OPINION, SHOULD THE STATE OF CALIFORNIA HAVE TAKEN OVER PG&E? Why or why not?

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Expert Solution

Question, what are the four market structures?

Answer: the main forms of market structure are:

A. Perfect competition: perfect competition refers to a market situation where there are large number of buyers and sellers dealing in a homogeneous product at a price fixed by the market . Under perfectly competitive market sellers sell a homogeneous product at a single uniform price. The price is not determined by particular firm but by the industry.

Example of perfect competition: in reality perfect competition has never existed. the closest example we we have for such kind of market can be market for agriculture goods like wheat and rice. In case of wheat there are numerous buyers and sellers ( farmers). as a result no single buyer and seller can significantly affect the price of wheat.

B. Monopoly: Monopoly refers to a market situation where there is a single cell selling a product which has no close substitutes. For example railways in India. under Monopoly there is a single seller selling the product. as a result the Monopoly firm and industry are one and the same thing and monopolist has full control over the supply and price of the product. however there are a large number of buyers of monopoly product and no single buyer can influence the market price. In case of monopoly firm and industry has complete control over the output. As a result monopolist is a price maker and fix its own price.

For example xerox 914 was the first marketable automatic and plain paper copier. It was granted 15 year exclusive patent right to xerography.

C. Monopolistic competition: it refers to a market situation in which there are a large number of firms with self closely related but differentiated product. Market for products like soap, toothpaste, air conditioners are examples of monopolistic competition. each form is in a position to exercise some degree of monopoly through product differentiation. Product differentiation refers to differentiating the product on the basis of brand, size, colour etc.

For example when you walk into departmental Store to buy toothpaste, you will find a number of brands like pepsodent, colgate, close up etc.

D. Oligopoly oligopoly is a market structure in which there are few sellers of the perfect or differentiated products. Oligopoly lies in between monopolistic and Monopoly. It refers to a market situation in which there are few forms selling homogeneous qod differentiated products.

For example in India, market for automobiles, cement, Steel etc hard examples of oligopolistic market. In each of these market there are few forms for each particular product.

Market for cars in India is dominated by few firms like Maruti, TATA, Hyundai, Ford, Honda etc .

Question: what is natural monopoly? Give example. why are natural monopolies often regulated by government regulatory agency?

answer: natural monopoly is a monopoly in an industry in which high infrastructural cost and barriers to entry related to the size of market give the largest supplier in the market, open the first supplier of in the market, an overwhelming advantage over potential competitors.

Examples of natural monopolies include, gas network, railway infrastructure, electricity grid etc.

natural monopolies are often regulated by some sort of government regulatory agency in order to ensure that consumer get fair pricing and proper services.

Question, Indian rupee name should the state of California have taken over pg&e why or why not?

Answer: it will improve the quality of life for Californians and it will Lead to safer, more relable and affordable energy.


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