ECO/365 Principles of Microeconomics
August 30, 2012
Differentiating Between Market Structures
Retail sales are indicators of microeconomic conditions presented in a given area at a particular place in time. Since Sam Walton opened his first Wal-Mart store, Wal-Mart has been making ripples throughout the micro economies of America. Wal-Mart’s market structure is typical of most of our nation’s largest corporations in that they are an oligopoly (Brown, 2010).
According to Colander (2010), “An oligopoly is a market structure in which there are only a few firms and these firms explicitly take other firms’ likely response into account when making decisions.” Furthermore, given that …show more content…
Perfect competition is a market structure where economic forces operate unimpeded (Colander, 2010). In this market both sellers and buyers are considered price takers because they take the price as determined by market supply and demand. The number of firms is large enough so that what one firm does, it will not have an effect on the others. The firm’s products are identical, and competitors and consumers have complete information about the product and no firm has a competitive advantage over another (Colander, 2010).
The polar opposite of perfect competition is called a monopoly. According to Colander (2010), “A monopoly is a market structure in which one firm makes up the entire market.” Monopolies face no competitive pressure from other firms and exist because of barriers to entry into their market (Colander, 2010). Drug companies are commonly viewed as monopolies because of the patents they hold entitling them to be the producers and providers of certain drugs.
The market structure of monopolistic competition is market in which there are many firms selling many different products and it has few barriers to entry (Colander, 2010). The distinguishing characteristics of monopolistic competition are that there are many sellers of differentiated products with multiple dimensions of competition and it allows for easy entry of firms in the long run.
In conclusion, Wal-Mart