Microeconomics Market Structure (Essay Sample)
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
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
- Student's name
- Course name and number
- Instructor's name
- Date submitted
- 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 from the Ashford University Library.
- 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.
The local mayor has hired me as a consultant to assess different market structures. The role that the local mayor expects me to carry out is to conduct an analysis and respond of the following vital questions which will assist the mayor understand various market structures of many businesses that operate within this city. This paper aims to examine different types of market structures, discuss examples related to the market structures, assess effect of price elasticity of demands of different market models, and discuss the role of government and impacts of international trade on various market models.
Question 1: Discuss each market structure (perfect competition, monopoly, oligopoly and monopolistic competition) and examine two characteristics of each market
All organizations which operate in the market intend to maximize their revenues at their output level. Organizations run their activities in a diverse environment, and such environments are created in different market conditions; thus organizations behave differently in accordance to diverse market conditions (Balboda, Daughety and Reinganum, 2004). The characteristics of every market have the influence on different demand curves of organizations in a different category. There are four different major market models such as oligopoly, pure competition, pure monopoly and monopolistic competition. Pure monopoly, oligopoly, and monopolistic competition are known as imperfect competition since competition among these market structures is limited.
In a pure competitive market structure, there are high numbers of organizations creating standardized products. Market prices are set by consumer demand. No suppliers have influence over market price; therefore, suppliers are known as price takers. This is because there are several organizations operating the market because there is low barrier of market (Jensen, 2006). A good example of pure competitive market is agricultural products like soybeans, wheat, and corn.
Monopolistic competition is similar to pure competition since there are several suppliers and there is a low barrier to market entry. Nevertheless in monopolistic competition, suppliers try to create certain price advantage and they do this by differentiating their products to be different from other similar products (Redmond, 2013). Consumer goods like beauty and health aids are categorized into this monopolistic competition market structure. Suppliers try differentiating their products to be better to set higher prices or gain larger market share than other competitors. In monopolistic competition, suppliers try to convince consumers through advertising, and this creates product superiority.
An oligopoly is referred as a market that a few suppliers dominate. There is high barrier to market entry; therefore, many new entrants are barred from competing in the market. The oligopolistic organizations have an influential role over the market price of their products. Nevertheless, they have put into consideration of activities of other organizations in the market when they change prices to neutralize any changes and to maintain their market share (Kyer and Maggs, 2014). A good example is auto manufacturers since fixed cost of manufactured vehicles are very high therefore limiting new entrants not to enter the market.
In a pure monopoly, only one supplier is operating in the market. The supplier has great market power and sets the price of its product. There is little competition due to high barrier to market entry (Balboda, Daughety and Reinganum, 2004). A good example of a pure monopolistic firm is Microsoft.
Question 2: Present one real-life example of a market structure in the local city and relate the example to every characteristic of the m...
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