Question

Select a specific real-world firm or market that we have not discussed in class or the textbook and discuss which model of market structure you think would be most appropriate to describe that market. (ie. Perfect competition, monopolistic competition, oligopoly, monopoly.) Real world markets never exactly meet the assumptions of the models, so you can also talk about what aspects of the real-world market may not fit the model what aspects are not well described by the model selected. You might want to consider, if relevant in your case, factors such as: the nature of the product, factors about the production such as whether or not there are likely to be economies of scale, the number of competitors, the degree of market power, how firms compete, and outcomes such as prices, mark ups, profits and firm entry/exit.

Criteria: Ability to relate the characteristics/assumptions of the models to the real world market.Compare the outcomes in the market to the models.Compare and contrast between all potentially relevant models.Correct usage and understanding of relevant models.Appropriate economic terminology used without error

Answer 1

Ans:- Each firm works with one focal rationale of winning higher income and profits. In any case, to understand this, they work under various market conditions. What decides this market condition is the degree of competition, the nature of the product being sold, the all out number of buyers in the market and passage and leave standards in the business individually.

To assess our contextual analysis, we have picked the Oil Market for our comprehension. The Oil market, is ruled by hardly any providers which gracefully to the whole worldwide economy.

Further more, they have framed understandings, for example, the OPEC which make them predominant and act like Oligopolies.

An oligopoly is only a gathering of organizations/nations that meet up for the shared advantage of their business. They control the market by being the main provider and subsequently manage costs and increment their profit edges by ensuring that flexibly lines are according to the concurred profit sharing ratios as it were.

The idea of the product is with the end goal that oil, starts from just a couple of nations which have an edge in the aggregation of this asset. These nations discover it moderately simpler for them to accomplish economies of scale which is only mass selling and minimizing expenses and profits high.

The center explanation behind this is the worldwide economy today has a ceaseless requirement for this type of power which is just expanding with time.

Further, the all out number of contenders are moderately low. This is on the grounds that in any event, when nations do have the asset, they despite everything import equivalent to they can't address nearby issues. For instance, a nation like India can continue just 18% of its interest through its stores and needs to import the rest from this oligopoly.

The competition in this market type has been made do with the assistance of exchange understandings and OPEC which represents Organization for Petroleum Exporting Countries routinely gives rules on how these nations are to share profits among themselves.

Be that as it may, these market types remain imperfect. In an average oligopoly value wars don't happen. This is on the grounds that organizations attempt to amplify their profits and it would not be profitable for a firm to sell products at a lesser cost.

In any case, in actuality, as on account of oil markets, it has been seen that value wars in fact exist.

• Monopolistic Competition:-

In the middle of a monopolistic market and perfect competition lies monopolistic competition. In monopolistic competition, there are numerous makers and purchasers in the marketplace, and all organizations just have a level of market control, though a monopolist in a monopolistic market has complete control of the market. In contrast to a monopolistic market, monopolistic competition offers not many boundaries to section.

All organizations can go into a market in the event that they feel the profits are sufficiently appealing. This makes monopolistic competition like perfect competition.

In any case, in a monopolist serious market, there is product separation. Products in monopolistic competition are close substitutes; the products have unmistakable highlights, for example, marking or quality.

This is not normal for both a monopolistic market, where there are no substitutes for products, and perfect competition, where the products are identicals.

Estimating in perfect competition depends on gracefully request, while evaluating in monopolistic competition is set by the dealer

• In a monopolistic market, there is just one firm that directs the cost and gracefully levels of merchandise and enterprises.

• A perfectly serious market is made out of numerous organizations, where nobody firm has market control.

• In reality, no market is absolutely monopolistic or perfectly serious.

Each genuine market joins components of both of these perfect sorts.

• In the middle of a monopolistic market and perfect competition lies monopolistic competition, or imperfect competition.

• In monopolistic competition, there are numerous makers and purchasers in the marketplace, and all organizations just have a level of market control.

• Monopoly:-

A monopoly alludes to a market structure where a solitary firm controls the whole market. In this situation, the firm has the most elevated level of market power, as purchasers don't have any other options.

Thus, imposing business models regularly decrease yield to expand costs and gain more profit.

The accompanying suspicions are made when we talk about restraining infrastructures:-

• The monopolist amplifies profit.

• It can set the value.

• There are high boundaries to passage and leave.

• There is just one firm that rules the whole market.

From the point of view of society, most imposing business models are typically not desirable, in light of the fact that they bring about lower yields and more significant expenses contrasted with serious markets. Along these lines, they are frequently managed by the legislature.

• There are four fundamental sorts of market structures:-

Perfect competition, imperfect competition, oligopoly, and monopoly.

Perfect competition describes a market structure, where countless little firms go up against one another with homogenous products. In the mean time, monopolistic competition alludes to a market structure, where countless little firms go up against one another with separated products.

An Oligopoly portrays a market structure where few firms contend with one another. Also, to wrap things up, a monopoly alludes to a market structure where a solitary firm controls the whole market.

• Perfect Competition:-

In a market that encounters perfect competition, costs are directed by flexibly and request. Firms in a perfectly serious market are all value takers in light of the fact that nobody firm has enough market control. In contrast to a monopolistic market, firms in a perfectly serious market have a little market share.

Barriers to entry are moderately low and permit firms to enter and exit without any problem. In opposition to a monopolistic market, a perfectly serious market has numerous buyers and venders, and shoppers can pick where they purchase their merchandise and ventures.

Organizations acquire simply enough profit to remain in business and no more. If they somehow happened to procure abundance profits, different organizations would enter the market and drive profits down.

As referenced before, perfect competition is a hypothetical develop. All things considered, it is hard to track down genuine instances of perfect competition.

An ongoing circumstance among Saudi and Russia, has prompted a sharp decrease in profits and costs in the oil market the same. Every nation needs to get prevalent and be the main player that provisions to the worldwide economy. While an oligopoly market would recommend that in a perfect world these nations should meet up and control supplies, they have started to acknowledge misfortunes but then work so they can decrease competition inside themselves.

In this way, in any event, working in Oligopoly market structures, certain varieties are to be sure feasible for firms and organizations the same.