Market Structures

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According to McConnell and Brue (2004), a monopoly occurs when a single firm is the sole producer of a product for which no close substitutes exist. Since the United States Postal Service (USPS, 2008) has no close substitutes, competition does not exist. The Postal Service’s universal service obligation (USO) is broadly outlined in multiple statutes and encompasses multiple dimensions: geographic scope, range of products, access to services and facilities, delivery frequency, affordable and uniform pricing, service quality, and security of the mail (USPS 2008). When monopolists are not protected by law from competition, the companies may have to keep their prices low in order to keep competition from entering the market. However, USPS is considered a pure monopoly and barriers of entry are in place. USPS is the only federal operating system that sends and delivers mail. USPS has competition in the market with services such as package delivery. Now, the agency has to compete with major companies such as UPS and FedEx. United States Postal Services depends on operation funding from postage and fees. Comparatively, the Postal Service provides a higher level of service and does so at low, affordable prices (USPS, 2008).

The University of Phoenix (UOP) is an institution for profit and it operates in a market structure with pure competition. According to McConnell and Brue (2004), “pure competition involves a very large number of firms producing a standardized product (that is, a product identical to that of other producers, such as corn or cucumbers). New firms can enter or exit the industry very easily,” (University of Phoenix, 2004). There are many universities, colleges, community colleges, and vocational schools for students to choose from. They offer education in the U.S. and overseas. Different educational institutions offer programs that are identical or similar to UOP. However, the tuition is not the same for all schools. UOP does not have a perfect substitute because of the many campus locations and varied degree programs. UOP does not have a significant control over the price of education. It can not change the market price; it can only adjust to it. University of Phoenix participates in Federal Student Aid grant and loan programs with attractive terms. All students seeking federal financial aid benefits must be admitted to a financial aid eligible degree or certificate program in order to determine financial aid eligibility. In order to be eligible for tuition deferment under the Financial Aid Plan, at least 50% of student’s annual tuition must be funded through the federal financial aid benefits and there are extremely strict policies that the UOP must adhere to in order to be eligible for Title IV. University of Phoenix observes the federal regulations regarding student loan requirements, including pricing and non-pricing strategies. The Arizona Student Loan Code of Conduct is designed to create and ensure uniform student loan practices that focus on the best interest of borrowers. In the Arizona Student Loan Code of Conduct, restrictions are defined to manage the relationships among school employees, learning institutions, lender advisory board members, and student loan organizations. In education, universities can freely enter and existing firms can freely leave purely competitive industries. According to McConnell and Brue (2004), “a few industries more closely approximate pure competition than any other market structure. In particular, we can learn much about markets for agricultural goods, fish products, foreign exchange, basic metals, and stock shares by studying the pure-competition model. Also, pure competition is a meaningful starting point for any discussion of price and output determination. Moreover, the operation of a purely competitive economy provides a standard, or norm, for evaluating the efficiency of the real-world economy,” (University of Phoenix, 2004). Nike is an example of a monopolistic...
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