Market Structure Paper

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Market Structure Paper

August 2, 2009

In this paper I will discuss competitive markets, monopolies, and oligopolies and what role each of these play in an economy? I will also point out:

o What the characteristics of each market structure is?
o How the price is determined in each market structure in terms of maximizing profits? o How output is determined in each market structure in terms of maximizing profits? o What are the barriers to entry, if any?

o What role does each market structure play in the economy?

First I would like to discuss what a competitive markets is. This market has a large number of buyers and sellers, such that no single buyer or seller is able to influence the price or control any other aspect of the market. That is, none of the participants have significant market control. A competitive market achieves efficiency in the allocation of scarce resources if no other market failures are present. (AmosWeb) Usually the competitive market does very well because demand price and supply are price equal. The demand and supply prices cannot generate any greater satisfaction by producing more of one good and less of another. (AmosWeb) People want good products and they want what they pay for. I would be willing to spend hundreds on hair supplies as long as the products are good. If a product does not really provide the satisfaction you are looking for then you want to pay little or nothing for it right? In this type of market you would see products on demand like lunch meat at Wal-Mart people want it and they want it to taste great, but they want it at an everyday low cost. A perfectly competitive market may have several distinguishing characteristics, including: Many buyers/Many sellers- many consumers with the willingness and ability to buy the product at a certain price, Many producers with the willingness and ability to supply the product at a certain price. Low- Entry/Exit barriers

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