2. Explain the different market structures using graphs and verbal explanations. Provide an example of each...

2. Explain the different market structures using graphs and verbal explanations. Provide an example of each market. Why monopolies arise and what governments can do in face of monopolies?

answer must contain a brief introduction to concepts and facts, a part of analysis and critical evaluation and final conclusions.

Solutions

Expert Solution

Market Form-1 : Perfect Competition

It refers to a market structure where there are large number of buyers and sellers in the market dealing with the homogenous products with the constant price.

Features :

Large of buyers and sellers
Homogenous Products
Freedom of entry and exit
Perfect knowledge about the market
Absence of Selling Cost

In case of Perfect competition,firm is known as Price- Taker and the Industry is known as Price-Maker.The demand curve will be horizontal in case of Perfect Competition.

Case 2 : Monopoly

Monopoly refers to a situation where there is only single seller selling a product with no close substitute.Features of Monopoly :

Singel Seller
No close substitute
Price Discrimination
Price Maker
Restrictions of entry and exit

In case of Monopoly , the industry is a firm and it is both Price taker and Price Maker.

In order to control Monopolies, the government can regulate it in following ways:

Price Capping
Check on the abuse of Monopoly Power
Regulation on quality of services

Case 3 : Monopolistic Competition

It refers to a market structure where there are large number of firms selling differentiated but closely related goods.

Features:

Large of Sellers
Product Differentiation
Non-Price Competition
Selling Cost
Freedom of entry and exit

Case 4 : Oligopoly

It refers to a market situation where there are few firms selling differentiated or homogeneous products.

Features :

Few Firms
Non-Price Competition
Barriers of entry
Selling Cost

Rahul Sunny answered 1 year ago

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