Monopoly and Perfect Competition Essay

Submitted By CynthiaRichardso
Words: 1408
Pages: 6

Mayor, I would like to thank you for soliciting my help I have put together a report for you that will help give you a better understanding of the various types of marketing systems in your town. I will discuss the four types of market structures and some important characteristics of each type that relate to your town’s industries, as well as other important details and features of each. I will begin with the four types of market structures which are as follows: perfect competition, monopolistic competition, oligopoly and monopoly.
Perfect Competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous products and there is free entry into and exit out of the industry(Amacher & Pate, 2013) perfect competition is a theoretical model and there is asking no real data on this model because in reality it does not exist and is an abstract idea which to compare other market structures and to help develop tool of analysis in order to determine price and quantity in the markets that are closely following the model. In perfect competition the idea is that seller is producing and selling the exact same product for the exact same amount and each seller has close to the same amount of buyers. Being in the Midwest, a good example of this would be the corn farmers. There is no one seller that can influence the price of the market on corn because all corn farmers have to sell at the same price to maximize their profits. In the perfect competition model it assumes that all corn are the same and the buyers do not care if they buy from farmer A or farmer B. This is a characteristic of perfect competition perfectly competitive firms produce a homogeneous product, the term homogeneous means that the product of one is no different from the other firms in the industry. The reason that perfect competition does not really exist is because all corn is not exactly the same and even if they were some of them will be packaged differently or have better sales staff causing buyers to choose one brand over the other. The corn producers will need to stay close to the market price and they don't have room to charge different prices as most buyers will prefer one over the other; this model is the ease of entry and exit, a seller can begin selling or quit selling it anytime they choose. This means that if one firm wishes to go into business or if another firm wishes to terminate production either can do so without any kind of constraint. (Amacher & Pate, 2013)
Now let's talk about the monopolistic competition: "the monopolistic competition model describes the industry of a large number of sellers each of these sellers offer different products, which is a good or service that has real or imagined characteristics that are different from those of other goods and services ". (Amacher & Pate, 2013) There must be competitive markets for all commodities, as well as markets for two factors, and which prices are publicly quoted so that firms and consumers can signal there demand and supply for each commodities simultaneously for pricing. A characteristic of the monopolistic model is that anyone can enter the market and begin selling their products that are almost the same as a firm that it’s already in the market selling that product. No one form can monopolize the production or sales of a product or service; the more firms that enter the market the less money the original firms will make. When firms enter, it is not it not only creates a new product but also creates the market for that product. (Matsuyama, 1995)
Oligopoly is the market structure that is somewhat different from the previous two models discussed. "Oligopoly is a market structure in which a few firms compete in perfectly. The scarcity of sellers is the key to firm’s behavior in oligopoly. In oligopoly firms realize that their smaller numbers produces mutual interdependence."(Amacher & Pate, 2013) Shared monopoly is the model of oligopoly that says that