A) In a perfectly competitive market, businesses offer or produce merchandise that is homogenous or identical to the merchandise in all other businesses in the market (Thomas & Maurice, 2010). However, to argue that these markets are not competitive, one could state that grocery stores and gasoline stations obtain differentiations in products where a product or business even is well-known by a product or service provided which makes it stand out amongst the rest of them (Kelchner, 2018). Nowadays, many stores offer a free pizza or some type of product after so many purchases are made. If grocery stores and gas stations are not in a competitive market, then there will not be many entrants into the market which is right the opposite of a perfectly competitive market, and there will be more obstacles to prevent easy entry and exit. Many grocery stores and gas stations acquire consumers from the general location of the store in which they do not have to differentiate a lot their products and services since most consumers are not going to drive a long distance if there is a store close by. Furthermore, if the concentration is elevated, it signifies that the top number of companies affect the fabrication or services offered in the market, then the industry is then supposed to be oligopolistic or …show more content…
Thus, market power is defined as the degree to which a business can impact the price of merchandise by exerting control over its demand, supply, or both (What is market, n.d.). Within the economic perception of perfect competition, all businesses in a market are presumed to have zero market power. Therefore, each business has to consent to the current market price without the ability to implement any power over it. However, in each market certain businesses do have varying amounts of market power, businesses with greatly differentiated merchandise have approximate monopoly power (What is market,
with a concentrated market share, an example of an oligopoly today. would be Nike, Reebok and Adidas for shoes. Most industries today are oligopolies, the possible reasons for this. would be that oligopolies in contrast to monopolistic competition. would be able to earn abnormal profits in the long run as well as the short run, as shown in the previous section.
Market structure is classified according to the degree of competition firms encounter in their industry (Baker College, 2016). There are four main market structures: pure competition, monopolistic competition, oligopoly and a pure monopoly. Pure competition is where fir...
Oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industry's output can affect competitors. Examples of oligopolistic structures are supermarket, banking industry and pharmaceutical industry.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
Firms may be categorized in a variety of different market structures. Perfectly competitive, monopolistically competitive, oligopolistic,
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
There are four major market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous product, and there is free entry into and exit out of the industry (Amacher & Pate, 2013). A perfect competition is characterized by the fact that homogeneous products are being created. With this being the case consumers have no tendency to buy one product over the other, because they are all the same. Perfect competitions are also set up so that there is companies are free to enter and leave a market as they choose. They are allowed to do with without any type of restriction, from either the government or the other companies. This structure is purely theoretical, and represents and extreme end of the market structure. The opposite end of the market structure from perfect competition is monopoly.
k where Si =sales revenue of ith firm/sales revenue of subsector Looking at the following table we can see that between the largest five firms in each of the following markets there has been a significant increase in their market concentration from 1963 to 1977: Product 1963/ % 1977/ % Beer 50.5 62.2 Biscuits 65.5 79.7 Cars 91.2 98.4 Flour 51 85.7 Pharmaceuticals 53.9 63.2 Refrigerators 71.9 98.8 Washing Machines 85.2 96.2 (Griffiths, A. & Wall, S. (1991) p 109) So as can be seen from the above figures in 1977 especially the car, refrigerators and washing machines industries had high market concentrations. However high market concentrations are not present in all industries, and much variance can occur. For example in the tobacco industry the five largest firms accounted for 99% output and 98% of employment in 1991, however at the same time in the leather goods industry the five largest firms accounted for only 10% of net output and employment in. However is there a way of classifying certain industries as being oligopolistic when looking at the three or five firm concentration
A perfectly competitive market is based on a model of perfect competition. For a market to fall under this model it must have a number of firms, homogeneous products, and easy exit and entry levels into the market (McTaggart, 1992).
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
Markets exist for the vast majority of goods and services. Markets can be defined broadly or narrowly. For example there are the consumer goods, capital goods, commodities, financial and labor markets. Each of these broad categories can be broken down into more specific markets. For example within the financial market there are markets for foreign exchange and for long term loans, within the corn modifies market there are the markets for corn and copper and within the consumer goods market there are the markets for clothes and cars. Prices usually play an important role in these markets.
In a perfectly competitive market, the goods are perfect substitutes. There are a large number of buyers and sellers, and each seller has a relatively small market share. Perfect competition has no barriers to information regarding prices and goods, meaning there is no risk-taking behaviour – sellers and buyers are rational. There is also a lack of barriers for entry and exit.
If competitors offer equally attractive products and services, then one will most likely have little power in the situation, because suppliers and buyers will...
The second market structure is a monopolistic competition. The conditions of this market are similar as for perfect competition except the product is not homogenous it is differentiated; thus having control over its price. (Nellis and Parker, 1997). There are many firms and freedom of entry into the industry, firms are price makers and are faced with a downward sloping demand curve as well as profit maximizers. Examples include; restaurant businesses, hotels and pubs, specialist retailing (builders) and consumer services (Sloman, 2013).
Price competition among rivals is close to nil, industry participants are very competitive when it comes to product differentiation. Product offerings to satisfy consumer demands include a variety of coffee, juices, muffins, bagels, cookies, cream cheese sandwiches, soups and other miscellaneous items.