Last Updated 12 May 2020

Various Market Structures and Characteristics

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The conditions for a monopolistic market are as follows: there is only one firm, which is large in size. The firm has to provide the market’s supply, and there are high barriers to entry. There are no close substitutes for the goods the monopoly firm provides or produces, and the monopolistic market operator should make up the entire market. The conditions for a monopolistic competitive market are as follows: the market has many small firms, there are no barriers to enter the market, each firm offers a different kind of product to the market, and this market has a normal, downward-sloping demand curve.

The conditions for an oligopolistic market are as follows: after oligopolistic firms have made a decision, they should consider the reaction of other firms; there are few firms in the market, they are mutually interdependent, and they can be collusive or non-collusive. Obviously, in some markets, the oligopoly can be part monopoly. Another factor is that some participants of these markets may, from time to time, receive legal challenges from others. Evaluate the effectiveness of competitive strategies within market structures Within each market structure, competition plays a role in the establishment of the market.

Perfectly competitive markets lay the foundation for competition in monopolies, and oligopolies. To consider perfectly competitiveness, firms must offer the same products, among other qualities. This strategy ensures that competition among firms is truly competitive as each firm is offering the same products. Monopolies however use the strategy of exclusivity to yield market space. In a monopoly, firms are the sole provider of a product to consumers and have no competition. To be the one and only providing a product yields market space in this structure.

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There are also monopolistic competition structures that provide consumers with similar product offerings and various levels of competition. Toothpaste is an example of a monopoly competition in that multiple brands make and market toothpaste. These firms compete with one another in areas such as product design, product performance/results, and price. In an oligopoly market, firms are alike other small firms, and compete with one another on the decisions or expectations of decisions of the other members of the oligopoly. The strategy put into use in an oligopoly has a heavy concentration on expectations of their counterparts.

Determine profit-maximizing strategies based on market structure analysis While determining the maximizing profitability of any product is changing the price to assess how this affects sales and choosing the price with the highest returns. The profit-maximizing position of a competitive firm occurs when marginal revenue equals marginal cost. To locate the profit-maximizing level of output for a perfect competitor find that level of output where marginal cost (MC = MR). Profit consideration is priceless average total cost times output at the profit-maximizing level of output.

The objective of an organization is to maximize profits is to get as much for it as possible. When it chooses its quantity to produce, according to the textbook, it will repeatedly ask “What will changes in how much I produce do to profit? ” Marginal revenue is the profit change in output. Marginal cost is the change in total cost associated with change in quantity. For any organization it is vital marginal revenue and marginal cost are a part of determining the profit-maximizing or loss-minimizing level of output of any.

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