International Business Structure

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Recommended: Monopoly versus oligopoly

There are four theoretical constructions relating to market structures, these are oligopoly, monopoly, perfect competition and monopolistic competition. Each theory has its individual assumptions and norms. In turn, these theories will be analysed, compared and contrasted with real life examples. The market structure related to each business reflects the profit maximisation and productions of the firms. The demand curve will also vary depending on the market structure; MC=MR.
Perfect competition is representative of a competitive market; customary firms sell homogenous products such as milk or potatoes. The generic assumptions for such firms refer to the barriers of entry being unrestricted. The commercial milk market for example, over the last 10 years has raised prices by 14p per litre. Such a product is relatively inelastic; this refers to the change in demand having little effect in comparison to the change in price. Firms with a perfect competition are generally price takers within the market. It is also often said the perfect competition firms have perfect knowledge; this refers to the agricultural industries. The demand curve for a perfect competition is a horizontal line. A firm with perfect competition which has increasing marginal costs will maximise profits, when they carry on producing until the marginal costs and marginal revenue are simultaneous.
A one firm market is said to be a Monopoly. Unlike perfect competition the barriers to entry are completely blocked. This restriction is due to the large market share and thus, a huge dominating power. The nature of the product is generally a unique item which reinforces that competition is often low or non-existent. A prime example of a monopoly firm is The Thames Water Com...

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Department for Environment, Food & Rural Affairs. (2013). milk prices and composition. Available: https://www.gov.uk/government/collections/milk-prices-and-composition. Last accessed 25th January 2014.
Department for Environment, Food & Rural Affairs. (2014). milk prices and composition. Available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/269736/milkprices-statsnotice-09jan14.pdf. Last accessed 25th January 2014.
Smithers, R. (2013). UK online grocery sales forecast to double amid shakeup of retail market. Available: http://www.theguardian.com/business/2013/sep/12/uk-online-grocery-sales-forecast-to-double-retail-shakeup. Last accessed 24th January 2014.
Friedman, J, W (1983). Oligopoly Theory. Cambridge: Press Syndicate, University of Cambridge. 1-40.
Sloman, J (2010). Economics For Business. 5th ed. USA: Prentice Hall. 210-260.

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