How Government Affects Each Market Structure's Ability to Price its Products (Essay Sample)
One of the books to use for this paper is by Amacher, R., & Pate, J. (2013). Microeconomics principles and policies. San Diego, CA: Bridgepoint Education, Inc.
Please pay close attention to the details requested for.
You have been hired as a consultant by your local mayor to look at the various market structures. Your role is to provide analysis and answers to these important questions that will help the mayor understand the structures of many of the businesses in his city:
Describe each market structure discussed in the course (perfect competition, monopolistic competition, oligopoly, and monopoly) and discuss two of the market characteristics of each market structure.
Identify one real-life example of a market structure in your local city and relate your example to each of the characteristics of the market.
Describe how high entry barriers into a market will influence long-run profitability of the firms.
Explain the competitive pressures that are present in markets with high barriers to entry.
Explain the price elasticity of demand in each market structure and its effect on pricing of its products in each market.
Describe how the role of the government affects each market structure’s ability to price its products.
Discuss the effect of international trade on each market structure.
Your paper will need to include a title page, a reference page, and in-text citations properly formatted according to the APA style guide. Also, your content should be eight to ten pages, which does not include your reference or title page. You will need to include at least five scholarly sources from the Ashford Library in your paper as part of your research to support your analysis.
Writing the Final Paper
Must be eight to ten double-spaced pages in length and formatted according to APA style as outlined in the approved APA style guide.
Must include a cover page that includes:
Title of paper
Course name and number
Must include an introductory paragraph with a succinct thesis statement.
Must address the topic of the paper with critical thought.
Must conclude with a restatement of the thesis and a conclusion paragraph.
Must use at least five scholarly resources.
Must use APA style as outlined in the approved APA style guide to document all sources.
Must include, on the final page, a Reference Page that is completed according to APA style as outlined in the approved APA style guide.
This report is aimed at helping the mayor to understand the various market structures that are presented by the many businesses in the city. Oligopoly, monopoly, monopolistic competition and perfect competition market structures will be analyzed as well as their characteristics. One real life example of each market structure within the city will be identified. High entry barriers to each market structure and their effects on the long-run profitability and the competitive pressures within those barriers will also be analyzed to give the mayor understanding of each structure. Price elasticity of demand impacts the pricing of the products in the market thus the price elasticity of demand of each markets structure as well as the role of the government in influencing prices of products in each market will as well as be discussed. Finally, international trade will be the last component to be analyzed on its effects on the above mentioned markets structures. The analysis will allow the mayor to understand the various market structures that the various businesses within his City represent.
To have a full understanding of each market structure, it is crucial that each is defined and compared separately. Perfect competition will be the first one to be analyzed. A perfect competition or competitive market which is also referred to as pure or free competition market is a market structure where there are many firms that freely enter or leave the market at their own considering the prices of products at the market as the their information since each firm provides a small share of the product to the market and does not have any influence in the market. Therefore, free entry and exit into the market is one of its characteristics. The firms that want to enter as well as those that want to exit the market do not have to fulfill certain requirements. Homogeneity of products is another characteristic of this market structure. The firms in the market cannot influence prices in the market since buyers are many and are dispersed and thus cannot influence prices either. Firms in the market provide a relatively small share of the product in the market; they offer the same products with almost the same characteristics while others have no variations. This is why they are not able to influence market structures since the customers have a wide range of products that they can choose from. Therefore, market equilibrium is achieved because each firm is allowed to sell as many products as it desires at the market clearing prices and still manage to make a profit.
Monopolistic competition market structure is the second one to be analyzed. According to Amacher and Pate (2013), a monopolistic completion market is â€œan industry composed of a large number of sellers...these sellers offer a differentiated product, which is a good or service that has real or imagined characteristics that are different from those of other goods or services,â€ (Amacher & Pate, 2013). This definition suggests that the products offered in the market are differentiated and are of high quality than those that already exist or were previously offered. Also from the definition we get the characteristics of this market structure. There are many firms but each firm has a small share of the market. These firms offer differentiated products making it different from the perfect competition model. The products are differentiated in style, brand name, packaging, location, pricing strategies, and advertisement. The gas stations in the city are an example of this model. Chevron and Texaco companies claim that they have a better-quality fuel within certain addictives that can enhance the performance of a car. However, other companies such as Shell and BP offers the pro...
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