Posted: December 8th, 2022

Market is an extremely interesting thing and is

Market Structure

Market is an extremely
interesting thing and is closely related to people’s everyday lives. No one could actually live without the
market, you have to buy vegetables and meat in the grocery stores, eat dinner
in nice restaurants,buy a new car and so no.
However, how much do you know about the market? In this paper, market structure will be given
a detailedexplanation based on my research.
Market structure could be classified as four specific branches which are
competitive supply, monopoly, monopolistic competition, and oligopoly.
Competitive
Supply
Four basic characters
In competitive supply
market, many firms, low entry barriers for firms, standardized products and
price taker of firms and consumers are the main four basic characters.
According to the book of Managerial Economics
and Organizational Architecture, “the soybeans market is an extremely good
example for the competitive supply market.
In soybeans market, many farmers grow soybeans and many consumers and
firms purchase soybeans. Soybeans are standardized
products. The entry barriers for
soybeans are relatively low for firms because it does not cost so much money
for firms. All the sellers and buyers of
soybeans are the price takers. There is
no single party having the power to control the market price.”
Demand and supply curve

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The demand curve for
the competitive supply is a straight line which is parallel to the X-axis. Marginal
revenue and average revenue are equal in the competitive supply market. They are also both equal to the market
price. It could be written as
Demand=Marginal revenue=Average revenue.

Supply curve for the
competitive supply market is the marginal cost curve. In the short run, firms supply must at least
cover variable cost. In the long run,
firms supply must cover all costs which including the explicit cost and the
implicit cost.
Profit Maximize
position
The profit maximize
position is the interception of marginal cost curve and marginal revenue. At that point, the marginal cost equals
marginal revenue. It will also lead to
the cost efficiency which minimize the average total cost and minimize the long
run average cost. Firms earn a normal
profit at the interception of MC and MR.

Monopoly
Three basic characters
In monopoly market
structure, single firm domain the market, firm produces the unique product and
high entry barriers. Unlike the
competitive supply market, the monopoly market only has one single firm exists
in the market. It has more power to
control the market price. The monopoly
firm produces the unique product.
Because of the Uniqueness product and single firm, it creates the high
entry barriers for new firms.
Demand and supply curve
The demand curve of
monopoly is a relatively inelastic downward-slope curve. It represents that with the price of goods
decrease and the quantity of demand of goods will be increase. The demand curve equals to the average
revenue curve. In this market structure,
the marginal revenue and average revenue decrease by producing more quantity of
goods. And they are not equal to each other.
Profit Maximize
position
The profit maximize
position is same as the competitive supply market. The profit maximize position is the
interception of marginal cost curve and marginal revenue. At that point, the marginal cost equals
marginal revenue. It will also lead to
the cost efficiency which minimize the average total cost and minimize the long
run average cost. Firms earn a normal
profit at the interception of MC and MR.

Monopolistic
competition
Three basic characters
In monopolistic
competition market, plenty of firms, low entry barriers and differentiated products
are the basic characters.Industries examples of the Monopolistic competition
market structure comprise of fast food, shampoo, toothpaste, professorial
services and so on. Low entry barriers
for all new firm to entry the industries if there any profit for firms to
ear. “For the fast food company like MacDonald’s
and Subway, they compete with each other.
However, consumers do not view Subway and MacDonald’s as perfect
substitutes.” (Managerial Economics and Organizational Architecture)
Demand and supply curve
The demand and supply
curve of Monopolistic competition are extremely similar with monopoly. The demand curve of monopolistic competition is
a relativelyelastic downward-slope curve.
It represents that with the price of goods decrease and the quantity of
demand of goods will be increase. The
demand curve equals to the average revenue curve. In this market structure, the marginal
revenue and average revenue decrease by producing more quantity of goods. And they are also unequal to each other. Monopolistic competition has economic profits
possible in short run. However, it does
not have the economic profit in long run.

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Oligopoly

Three basic characters
The first character of
oligopoly is just few firms existing in the market.The second character of
oligopoly is high entry barriers for new firms to enter the market.The third
character of oligopoly is standardized or differentiated products. Firms could earn considerable profits.

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