Stress Analysis
Module Code: FC006
Group: C
Module Title: Economics in an International Context
Assessment Title: What are the main differences between Monopolistic Competition and Oligopoly market structures? Which of these market structures best serves the interests of the consumer and why?
Tutor Name: David Lee
Student ID Number: 200937726
Date of submission: 22th March 2013
Word Count:
There are different types of market structure, which every type of market structure has different level of barriers to enter, different number of firms, different types of product and so on. The most common market structures are perfect competition, monopolistic competition, oligopoly and monopoly. This essay will be about the main differences between monopolistic competition and oligopoly, and explain which of these market structures best serves the interests of the consumer.
According to Sloman(2007) "Monopolistic competition is nearer to the competitive end of the spectrum. It can best be understood as a situation where there are a lot of firms competing but each firm have some degree of market power." In other words, there are a lot of buyers and sellers in a monopolistic market structure. Products are heterogeneous, which means that product are not the same but similar, they can be various in terms of different sellers. Consumers have perfect knowledge about the product because product are similar. Also, it is completely free to enter and exit the market.
In monopolistic competition, firms tend to earn normal profit only in long run, they could earn abnormal profit in short run but as there are no barriers to enter the market, other entrepreneurs will easily enter the market and compete with them. In this case, as there are more competitors in the market, firms can only earn normal profit, which can only keep the firm continuously run without extra profits. For example, a local fast food restaurant is set up near by a residential area, it attracted a lot of
Group: C
Module Title: Economics in an International Context
Assessment Title: What are the main differences between Monopolistic Competition and Oligopoly market structures? Which of these market structures best serves the interests of the consumer and why?
Tutor Name: David Lee
Student ID Number: 200937726
Date of submission: 22th March 2013
Word Count:
There are different types of market structure, which every type of market structure has different level of barriers to enter, different number of firms, different types of product and so on. The most common market structures are perfect competition, monopolistic competition, oligopoly and monopoly. This essay will be about the main differences between monopolistic competition and oligopoly, and explain which of these market structures best serves the interests of the consumer.
According to Sloman(2007) "Monopolistic competition is nearer to the competitive end of the spectrum. It can best be understood as a situation where there are a lot of firms competing but each firm have some degree of market power." In other words, there are a lot of buyers and sellers in a monopolistic market structure. Products are heterogeneous, which means that product are not the same but similar, they can be various in terms of different sellers. Consumers have perfect knowledge about the product because product are similar. Also, it is completely free to enter and exit the market.
In monopolistic competition, firms tend to earn normal profit only in long run, they could earn abnormal profit in short run but as there are no barriers to enter the market, other entrepreneurs will easily enter the market and compete with them. In this case, as there are more competitors in the market, firms can only earn normal profit, which can only keep the firm continuously run without extra profits. For example, a local fast food restaurant is set up near by a residential area, it attracted a lot of