The Best Suited Market Structure For The Movie Market Essay

The Best Suited Market Structure For The Movie Market Essay

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2. The best-suited market structure for the movie market in Micropolis is of an Oligopoly. Since there are only a few suppliers or theaters in the market it makes the market concentrated, making it suitable for an oligopoly. In addition to this, the barriers to entry of the movie market are high as well, the startup costs and the long hauling process of starting a movie theater helps limit the number of firms entering the market. These high barriers to entry also help the movie market to fit into the oligopoly market structure. However, the only limiting factor is the product itself. A movie theater’s product is a movies combined with the experience of watching a movie. Since the IMAX screens would provide a slightly more unique product, this characteristic is more suited to be a part of a monopolistic market structure. To conclude, even those there might be some contradicting characteristics, the prevailing characteristics of the movie are of an oligopoly.
3. In a perfectly competitive market, the firms are price takers since are many firms due to no barriers to entry. The price is determined by the interaction of the demand and supply curve. Since none of the individual firms can affect price they accept the price determined by the market. So the profit maximizing level of production occurs when marginal cost equals marginal revenue. This leads to a pricing strategy where price equal to the marginal cost (P=MC). In the short-run firms can expect to have profits, however, in the long-run as more firms enter, the profits are competed away leaving firms with zero economic profits.
As far as monopolies are concerned, they are price-makers as there is not entry of another firms and the monopoly is the sole supplier. This gives the m...

... middle of paper ... declines. This helps them from keeping their cost low and charge prices that are too low for new competitors to stay in business, hence preventing new theaters from entering. In addition to economies of scales, another barrier to entry could be the ownership of key input. Since both the theaters have been in business for a long times they already have established connections which help them get movies to their theaters and they already have infrastructure and the recognition to attract customers. Their movies experience and familiarity with the customers will make it quite difficult for a new theater to enter and create brand recognition for itself. These barriers to entry could have a strong impact on preventing new competition as these theaters are already well recognized and have the ability to charge lower prices that would be highly difficult to compete with.

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