Market Structure

Market Structure

Ellen Tanksley, Patti Weisinger, Flor De Liz Torres,

Koucia Lee, Coleman Tankersley

ECO365

September 16, 2013

Fariba Kheradmand

Market Structure

Monopoly and Oligopoly

The reading covered the different types of market and their characteristics, how to evaluate the effectiveness of competitive strategies, and profit-maximizing strategies

Monopoly is a market structure in which one firm makes up the entire market. Monopoly occurs when a company is the only one in the market with no competition. This creates a significant problem for others entering into the same market. Oligopoly occurs when there are few competitors in the industry in which pricing decisions are important to remain competitive. An example of this type of industry would be the automotive industry. In a monopolistically competitive market, the goods that are sold aren’t homogeneous, as in perfect competition; they are differentiated slightly. The differentiation creates the strategy to become top competitor in the industry.

Because market structures are different, each has its own way to determine the best strategies to remain competitive. Although monopolies do not have to worry about competition, firms based upon the other structures do. Firms that qualify as oligopolistic will use pricing strategies to remain competitive, firms following the monopolistic competition model will use product differentiation to compete, and those that fall under the perfect competition structure will use pricing, differentiation, and marketing strategies to remain competitive.

The Shutdown Point

In this week’s lesson, I learned about the shutdown point of a business. There are times when I wonder why businesses would not shut down when they are not making any profit or they just shut down immediately while still producing. I learned that the shutdown point is the combination of output and price where a firm earns just enough revenue to cover its total variable costs. All...