Eco 204 Week 5

Consultant to the Local Mayor

David D. Moore

ECO 204: Principles of Microeconomics BQC1334A

Greg Kropkowski

23 Sept 2013

Ashford University

Consultant to the Local Mayor

This paper is going to address the various market structures that will help the local mayor understand the structures of the many businesses in the city. In order to do this the following market structures will be addressed: perfect competition, monopolistic competition, oligopoly and monopoly. For each of these topic structures two market characteristics will be discussed. A real-life market structure within the local city will be identified with relation to the characteristics of that market. Next the paper will discuss how high entry barriers into a market structure will influence long-run profitability of the firms. Competitive pressures that are present in markets with high barriers to entry will be explained. Then the paper will discuss the price elasticity of demand in each market structure and its effect on pricing of its products in each market. After that a description of how the role of government affects each market structure’s ability to price its products will be provided. Finally, the effect of international trade on each market structure will be discussed.

In order to understand the different market structures of the city, each structure needs to be defined and discussed. The first structure to be discusses is perfect competition. This is an ideal structure that does not really exist in the real market, but; is used as a theoretical model to compare other structures to. In a perfect competition market there is free entry and exit into the market. Without the constraints of exiting and entering the market new businesses will not affect the market of a homogenous product. At a market clearing price a firm would be able to sell as much product as it chooses while making a profit. This would mean that there is market equilibrium. With average revenue greater than average...