These differ due to the different number of strength of buyers and sellers and also the level of collusion between them.
There are stages of competition and magnitude of the difference in products. When there are many buyers and sellers of a product then neither firms are able influence prices, therefore making it competitive. In competitive markets there are not restraints on firms going in and out of the market and buyers can purchase the same product or products from many sellers and get the same products. For example, potatoes are in the competitive market because consumers can find a potato farm that offers them at the lowest market price, and they can produce however much they want or as much as they can profit from at the going rate.
There are many options for buyers because, with the knowledge, there is a lower price so they can always observe to find the best price.
However marginal cost do vary depending on the amount of goods produced. For example, a firm may increase input so marginal cost is equal to the market price. As long as the market price covers the variable cost there is incentive to stay in business, and possibly in the long run maximize profits Jeffery Ely, So basically with a numerous amount of buyers and sellers in the market it creates competition and very little bargaining power for buyers and sellers.
There are usually not many barriers that exist within competitive markets because the exit and entry levels are low. For example, even though the market for making cars competitive the upfront capitol cost are high, which can create difficulty entering, or getting started.
In some cases an exit barrier may exist if a large amounts of money is tied up in firm. Accessed September 15, Basically there are four features of monopoly. First one is strong barriers on the entry of new firms. As there is one firm no other rival producers can enter the market of the same product. Since the monopolist has absolute control over the production and sale of the commodity certain economic barriers are imposed on the entry of potential rivals.
Secondly, under monopoly there are large numbers of buyers although the seller is one. Third one is under monopoly a single producer produces single commodities which have no close substitute.
Monopoly can not exist when there is competition and lastly, in case of monopoly one firm constitutes the whole industry. The entire demand of the consumers for a product goes to the monopolist. In an oligopoly there are very few sellers of the good. The product may be differentiated among the sellers e. This means that the small amount of sellers all tend to be aware of one another and what business decisions they are all making.
Since there are few numbers of firms of producing a given product, there is competition into production of quality products and services.
There is availability of information is a little bit easy in terms of costs as compared to a monopoly market structure. In such an industry there is easier entry and exit which is quiet better than that of monopoly which is blocked. Oligopolistic markets leave customers with less choice.
Firms cannot take independent decisions and always have to consider the views of other dominant players in the market. New firms cannot enter to the market easily due to various barriers of entry.
Firms produce homogeneous, identical, units of output that are not branded. Each unit of input, such as units of labor, is also homogeneous.
No single firm can influence the market price, or market conditions.
Market Structure is the one of the important elements to understand how market will function determine the behavior of firms in the market and the outcome that will be produced by the market. In economics term, market structure is the number, size, kind and distribution of buyers and sellers.
1. Market structures. Match the following descriptions with the appropriate market structure?
Nov 07, · Differentiating between Market Structures The structure of a market is defined by the number of firms in the market, the existence or otherwise of barriers to entry of new firms, and the interdependence among firms in determining pricing and output to maximize profits. Impacts of market structure, technology, prices, competitors, cost structure, benefits and price elasticity are some of the topics that will be discussed throughout the paper.
At present, the current structure of the PC market is a market structure closer to one of perfect competition, with a very buyer rather than seller friendly focus. Many buyers and sellers and a high level of price volatility characterize the PC industry. Market structure is defined as the particular environment of a firm, the characteristics of which influence the firm's pricing and output decisions.