Write an essay describing the following types of markets: Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly....

Write an essay describing the following types of markets: Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly. Describe each market in terms of the number of producers, how products would be classified (homogoneous, differentiated, etc.), the level of market power, the extent of barriers to entry and the type of profit experienced by firms in each (zero, normal or above normal profit). Give an example of a firm or product market for each type of competition. A short paragraph explaining each market is sufficient.

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Expert Solution

1) PERFECT COMPETITION : It is a market structure, in which there are large number of producers producing the same homogeneous goods. And it is difficult for the customers to differentiate between the goods and the producers. And each producer take the prices as given which imply that they don't have any market power. And there is no barriers to entry in this type of market. Each producer earns normal profits here. Example: vegetables vendors.

2) MONOPOLISTIC COMPETITION : It is a market structure in which number of producers are large but the goods of each producer is different from other producer's good. We can say that each producer's good is a perfect substitutes. They have a little market power in their hands and yes their is no barriers to entry in this type of market structure. And they earn profits above normal. Example : Toothpaste companies.

3) OLIGOPOLY : It is a market structure in which number of producers are very few and goods of each producers are completely differentiated. Producers here have significant level of market power. And here entry of barriers exist because it requires a huge amount of investment to start this type of business. And here they earn above normal profit. Example Pepsi and Coca-Cola.

4) MONOPOLY : It is a market structure in which there is just a single producer and his good is completely unique. And yes there is market barrier in this type of industry because you need a completely unique good. And this guy completely handles the market. Example Microsoft

Rahul Sunny answered 11 months ago

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