types of market structures<\/h3>\r\n\r\n\t- perfect competition<\/strong><\/li>\r\n\t
- pure monopoly<\/strong><\/li>\r\n\t
- monopolistic competition<\/strong><\/li>\r\n\t
- oligopoly<\/strong><\/li>\r\n<\/ol>\r\n<\/section>\r\n
Perfect Competition<\/span><\/h3>\r\n\r\n\r\n\r\nCharacteristics of\u00a0perfect (pure) competition<\/span>\u00a0include:<\/p>\r\n\r\n\t- A large number of small firms are in the market.<\/li>\r\n\t
- The firms sell similar products; that is, each firm\u2019s product is very much like the products sold by other firms in the market.<\/li>\r\n\t
- Buyers and sellers in the market have good information about prices, sources of supply, and so on.<\/li>\r\n\t
- It is easy to open a new business or close an existing one.<\/li>\r\n<\/ul>\r\n
In a perfectly competitive market, many firms sell their products at prices determined solely by forces beyond their control. Because the products are very similar and each business contributes only a small amount to the total quantity available for sale, price is determined by supply and demand. A business that raised its price even a little above the going rate would lose customers. In the wheat market, for example, the product is essentially the same from one wheat producer to the next. Thus, none of the producers has control over the price of wheat.<\/span><\/p>\r\n<\/div>\r\n<\/div>\r\nPure Monopoly<\/span><\/h3>\r\n<\/section>\r\n\r\n![\"a](\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5830\/2022\/09\/11191741\/pexels-lisa-fotios-2090881-200x300.jpg\")
At the other end of the spectrum is\u00a0pure monopoly<\/span>, the market structure in which a single business accounts for all industry sales of a particular good or service. The firm\u00a0is<\/em>\u00a0the industry. This market structure is characterized by\u00a0barriers to entry, the\u00a0<\/span>factors that prevent new firms from competing equally with the existing firm. Often the barriers are technological or legal conditions. Polaroid, for example, held major patents on instant photography for years. When\u00a0Kodak<\/span>\u00a0tried to market its own instant camera,\u00a0Polaroid<\/span>\u00a0sued, claiming patent violations.\u00a0Polaroid<\/span>\u00a0collected millions of dollars from\u00a0Kodak<\/span>. Another barrier may be one firm\u2019s control of a natural resource.\u00a0DeBeers Consolidated Mines Ltd.<\/span>, for example, controls most of the world\u2019s supply of uncut diamonds.<\/p>\r\nPublic utilities, such as gas and water companies, are pure monopolies. Some monopolies are created by a government order that outlaws competition. In\u00a0Alabama, Idaho, New Hampshire, North Carolina, Pennsylvania, Utah and Virginia, liquor stores are owned by the state government; no private ownership is permitted.[footnote]https:\/\/www.thrillist.com\/culture\/state-owned-liquor-stores[\/footnote]<\/p>\r\n<\/section>\r\n\r\nMonopolistic Competition<\/h3>\r\n
Three characteristics define the market structure known as\u00a0monopolistic competition<\/span>:<\/p>\r\n\r\n\t- Many firms are in the market.<\/li>\r\n\t
- The firms offer products that are close substitutes but still differ from one another.<\/li>\r\n\t
- It is relatively easy to enter the market.<\/li>\r\n<\/ul>\r\n
Under monopolistic competition, firms take advantage of product differentiation. Industries where monopolistic competition occurs include clothing, food, and similar consumer products. Firms under monopolistic competition have more control over pricing than do firms under perfect competition because consumers do not view the products as perfect substitutes. Nevertheless, firms must demonstrate product differences to justify their prices to customers. Such distinctions may be significant or superficial. For example, Chipotle emphasized the quality of their ingredients and positioned themselves as a healthy fast food alternative.[footnote]https:\/\/www.asimplemodel.com\/insights\/examples-of-differentiated-products[\/footnote]<\/p>\r\n<\/section>\r\n\r\nOligopoly<\/h3>\r\n
An\u00a0oligopoly<\/span>\u00a0has two characteristics:<\/p>\r\n\r\n\t- A few firms produce most or all of the output.<\/li>\r\n\t
- Large capital requirements or other factors limit the number of firms.<\/li>\r\n<\/ul>\r\n
Boeing<\/span>\u00a0and\u00a0Airbus Industries<\/span>\u00a0(aircraft manufacturers) and\u00a0Apple<\/span>\u00a0and\u00a0Google<\/span>\u00a0(operating systems for smartphones) are major players in different oligopolistic industries.<\/p>\r\nWith so few firms in an oligopoly, what one firm does has an impact on the other firms. Thus, the firms in an oligopoly watch one another closely for new technologies, product changes and innovations, promotional campaigns, pricing, production, and other developments. For example, facing increasing competition from Airbus' fuel-efficient A320 airplane, Boeing rushed to bring the 737 Max to market much faster than they had ever previously introduced a new design. When two Boeing 737 Max airplanes crashed within the space of 5 months in 2019, many blamed the tragedies on Boeing putting profit before safety.[footnote]https:\/\/www.nytimes.com\/2019\/03\/23\/business\/boeing-737-max-crash.html[\/footnote]<\/p>\r\n
Anticompetitive Behavior<\/h4>\r\n
Sometimes businesses go so far as to coordinate their pricing and output decisions but that is illegal in the United States. This kind of coordination can be anticompetitive, meaning that it interferes with the usual ability of supply and demand in the market to set prices that are fair to consumers. Many antitrust cases\u2014legal challenges based on laws designed to limit anticompetitive behavior\u2014occur in oligopolies.<\/p>\r\n
The market structure of an industry can change over time. Take, for example, telecommunications. At one time,\u00a0AT&T<\/span>\u00a0had a monopoly on long-distance telephone service nationwide. Then the U.S. government divided the company into seven regional phone companies in 1984, opening the door to greater competition. Other companies such as\u00a0MCI<\/span>\u00a0and\u00a0Sprint<\/span> entered the fray and built state-of-the-art fiber-optic networks to win customers from the traditional providers of phone service. Today, the broadcasting, computer, telephone, mobile communications, and video industries are converging as companies consolidate through merger and acquisition.<\/p>\r\n[reveal-answer q=\"199277\"]Click to see a comparison of market structures[\/reveal-answer]
\r\n[hidden-answer a=\"199277\"]<\/p>\r\n\r\n\r\n
Perfect Competition<\/span><\/h3>\r\n\r\n\r\n\r\nCharacteristics of\u00a0perfect (pure) competition<\/span>\u00a0include:<\/p>\r\n\r\n\t- A large number of small firms are in the market.<\/li>\r\n\t
- The firms sell similar products; that is, each firm\u2019s product is very much like the products sold by other firms in the market.<\/li>\r\n\t
- Buyers and sellers in the market have good information about prices, sources of supply, and so on.<\/li>\r\n\t
- It is easy to open a new business or close an existing one.<\/li>\r\n<\/ul>\r\n
In a perfectly competitive market, many firms sell their products at prices determined solely by forces beyond their control. Because the products are very similar and each business contributes only a small amount to the total quantity available for sale, price is determined by supply and demand. A business that raised its price even a little above the going rate would lose customers. In the wheat market, for example, the product is essentially the same from one wheat producer to the next. Thus, none of the producers has control over the price of wheat.<\/span><\/p>\r\n<\/div>\r\n<\/div>\r\nPure Monopoly<\/span><\/h3>\r\n<\/section>\r\n\r\nAt the other end of the spectrum is\u00a0pure monopoly<\/span>, the market structure in which a single business accounts for all industry sales of a particular good or service. The firm\u00a0is<\/em>\u00a0the industry. This market structure is characterized by\u00a0barriers to entry, the\u00a0<\/span>factors that prevent new firms from competing equally with the existing firm. Often the barriers are technological or legal conditions. Polaroid, for example, held major patents on instant photography for years. When\u00a0Kodak<\/span>\u00a0tried to market its own instant camera,\u00a0Polaroid<\/span>\u00a0sued, claiming patent violations.\u00a0Polaroid<\/span>\u00a0collected millions of dollars from\u00a0Kodak<\/span>. Another barrier may be one firm\u2019s control of a natural resource.\u00a0DeBeers Consolidated Mines Ltd.<\/span>, for example, controls most of the world\u2019s supply of uncut diamonds.<\/p>\r\nPublic utilities, such as gas and water companies, are pure monopolies. Some monopolies are created by a government order that outlaws competition. In\u00a0Alabama, Idaho, New Hampshire, North Carolina, Pennsylvania, Utah and Virginia, liquor stores are owned by the state government; no private ownership is permitted.[footnote]https:\/\/www.thrillist.com\/culture\/state-owned-liquor-stores[\/footnote]<\/p>\r\n<\/section>\r\n\r\nMonopolistic Competition<\/h3>\r\n
Three characteristics define the market structure known as\u00a0monopolistic competition<\/span>:<\/p>\r\n\r\n\t- Many firms are in the market.<\/li>\r\n\t
- The firms offer products that are close substitutes but still differ from one another.<\/li>\r\n\t
- It is relatively easy to enter the market.<\/li>\r\n<\/ul>\r\n
Under monopolistic competition, firms take advantage of product differentiation. Industries where monopolistic competition occurs include clothing, food, and similar consumer products. Firms under monopolistic competition have more control over pricing than do firms under perfect competition because consumers do not view the products as perfect substitutes. Nevertheless, firms must demonstrate product differences to justify their prices to customers. Such distinctions may be significant or superficial. For example, Chipotle emphasized the quality of their ingredients and positioned themselves as a healthy fast food alternative.[footnote]https:\/\/www.asimplemodel.com\/insights\/examples-of-differentiated-products[\/footnote]<\/p>\r\n<\/section>\r\n\r\nOligopoly<\/h3>\r\n
An\u00a0oligopoly<\/span>\u00a0has two characteristics:<\/p>\r\n\r\n\t- A few firms produce most or all of the output.<\/li>\r\n\t
- Large capital requirements or other factors limit the number of firms.<\/li>\r\n<\/ul>\r\n
Boeing<\/span>\u00a0and\u00a0Airbus Industries<\/span>\u00a0(aircraft manufacturers) and\u00a0Apple<\/span>\u00a0and\u00a0Google<\/span>\u00a0(operating systems for smartphones) are major players in different oligopolistic industries.<\/p>\r\nWith so few firms in an oligopoly, what one firm does has an impact on the other firms. Thus, the firms in an oligopoly watch one another closely for new technologies, product changes and innovations, promotional campaigns, pricing, production, and other developments. For example, facing increasing competition from Airbus' fuel-efficient A320 airplane, Boeing rushed to bring the 737 Max to market much faster than they had ever previously introduced a new design. When two Boeing 737 Max airplanes crashed within the space of 5 months in 2019, many blamed the tragedies on Boeing putting profit before safety.[footnote]https:\/\/www.nytimes.com\/2019\/03\/23\/business\/boeing-737-max-crash.html[\/footnote]<\/p>\r\n
Anticompetitive Behavior<\/h4>\r\n
Sometimes businesses go so far as to coordinate their pricing and output decisions but that is illegal in the United States. This kind of coordination can be anticompetitive, meaning that it interferes with the usual ability of supply and demand in the market to set prices that are fair to consumers. Many antitrust cases\u2014legal challenges based on laws designed to limit anticompetitive behavior\u2014occur in oligopolies.<\/p>\r\n
The market structure of an industry can change over time. Take, for example, telecommunications. At one time,\u00a0AT&T<\/span>\u00a0had a monopoly on long-distance telephone service nationwide. Then the U.S. government divided the company into seven regional phone companies in 1984, opening the door to greater competition. Other companies such as\u00a0MCI<\/span>\u00a0and\u00a0Sprint<\/span> entered the fray and built state-of-the-art fiber-optic networks to win customers from the traditional providers of phone service. Today, the broadcasting, computer, telephone, mobile communications, and video industries are converging as companies consolidate through merger and acquisition.<\/p>\r\n[reveal-answer q=\"199277\"]Click to see a comparison of market structures[\/reveal-answer]
\r\n[hidden-answer a=\"199277\"]<\/p>\r\n\r\n\r\n
Characteristics of\u00a0perfect (pure) competition<\/span>\u00a0include:<\/p>\r\n In a perfectly competitive market, many firms sell their products at prices determined solely by forces beyond their control. Because the products are very similar and each business contributes only a small amount to the total quantity available for sale, price is determined by supply and demand. A business that raised its price even a little above the going rate would lose customers. In the wheat market, for example, the product is essentially the same from one wheat producer to the next. Thus, none of the producers has control over the price of wheat.<\/span><\/p>\r\n<\/div>\r\n<\/div>\r\n Public utilities, such as gas and water companies, are pure monopolies. Some monopolies are created by a government order that outlaws competition. In\u00a0Alabama, Idaho, New Hampshire, North Carolina, Pennsylvania, Utah and Virginia, liquor stores are owned by the state government; no private ownership is permitted.[footnote]https:\/\/www.thrillist.com\/culture\/state-owned-liquor-stores[\/footnote]<\/p>\r\n<\/section>\r\n Three characteristics define the market structure known as\u00a0monopolistic competition<\/span>:<\/p>\r\n Under monopolistic competition, firms take advantage of product differentiation. Industries where monopolistic competition occurs include clothing, food, and similar consumer products. Firms under monopolistic competition have more control over pricing than do firms under perfect competition because consumers do not view the products as perfect substitutes. Nevertheless, firms must demonstrate product differences to justify their prices to customers. Such distinctions may be significant or superficial. For example, Chipotle emphasized the quality of their ingredients and positioned themselves as a healthy fast food alternative.[footnote]https:\/\/www.asimplemodel.com\/insights\/examples-of-differentiated-products[\/footnote]<\/p>\r\n<\/section>\r\n An\u00a0oligopoly<\/span>\u00a0has two characteristics:<\/p>\r\n Boeing<\/span>\u00a0and\u00a0Airbus Industries<\/span>\u00a0(aircraft manufacturers) and\u00a0Apple<\/span>\u00a0and\u00a0Google<\/span>\u00a0(operating systems for smartphones) are major players in different oligopolistic industries.<\/p>\r\n With so few firms in an oligopoly, what one firm does has an impact on the other firms. Thus, the firms in an oligopoly watch one another closely for new technologies, product changes and innovations, promotional campaigns, pricing, production, and other developments. For example, facing increasing competition from Airbus' fuel-efficient A320 airplane, Boeing rushed to bring the 737 Max to market much faster than they had ever previously introduced a new design. When two Boeing 737 Max airplanes crashed within the space of 5 months in 2019, many blamed the tragedies on Boeing putting profit before safety.[footnote]https:\/\/www.nytimes.com\/2019\/03\/23\/business\/boeing-737-max-crash.html[\/footnote]<\/p>\r\n Sometimes businesses go so far as to coordinate their pricing and output decisions but that is illegal in the United States. This kind of coordination can be anticompetitive, meaning that it interferes with the usual ability of supply and demand in the market to set prices that are fair to consumers. Many antitrust cases\u2014legal challenges based on laws designed to limit anticompetitive behavior\u2014occur in oligopolies.<\/p>\r\n The market structure of an industry can change over time. Take, for example, telecommunications. At one time,\u00a0AT&T<\/span>\u00a0had a monopoly on long-distance telephone service nationwide. Then the U.S. government divided the company into seven regional phone companies in 1984, opening the door to greater competition. Other companies such as\u00a0MCI<\/span>\u00a0and\u00a0Sprint<\/span> entered the fray and built state-of-the-art fiber-optic networks to win customers from the traditional providers of phone service. Today, the broadcasting, computer, telephone, mobile communications, and video industries are converging as companies consolidate through merger and acquisition.<\/p>\r\n [reveal-answer q=\"199277\"]Click to see a comparison of market structures[\/reveal-answer]\r\n\t
Pure Monopoly<\/span><\/h3>\r\n<\/section>\r\n
At the other end of the spectrum is\u00a0pure monopoly<\/span>, the market structure in which a single business accounts for all industry sales of a particular good or service. The firm\u00a0is<\/em>\u00a0the industry. This market structure is characterized by\u00a0barriers to entry, the\u00a0<\/span>factors that prevent new firms from competing equally with the existing firm. Often the barriers are technological or legal conditions. Polaroid, for example, held major patents on instant photography for years. When\u00a0Kodak<\/span>\u00a0tried to market its own instant camera,\u00a0Polaroid<\/span>\u00a0sued, claiming patent violations.\u00a0Polaroid<\/span>\u00a0collected millions of dollars from\u00a0Kodak<\/span>. Another barrier may be one firm\u2019s control of a natural resource.\u00a0DeBeers Consolidated Mines Ltd.<\/span>, for example, controls most of the world\u2019s supply of uncut diamonds.<\/p>\r\nMonopolistic Competition<\/h3>\r\n
\r\n\t
Oligopoly<\/h3>\r\n
\r\n\t
Anticompetitive Behavior<\/h4>\r\n
\r\n[hidden-answer a=\"199277\"]<\/p>\r\n