Market Structures and Non-Price Competition in Economics

2019 Semester 2
MGE1108 Economics for Business
ASSIGNMENT SUBMISSION (Assessment 3)
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Question 1
Compare the market structures of Perfect Competition, Monopoly, Monopolistic Competition and
Oligopoly under the following headings (about 250 words).
a. number of firms in the market
b. similarity of the products sold
c. barriers to entry
(9marks)
Answer to Question 1
a) Number of firms
Perfect Competition – The number of sellers present in this market structure is quite huge.
Monopolistic Competition – There are many sellers (firms) in this market structure but lower in
comparison to perfect competition.
Oligopoly – In this market structure, there are only few sellers that have a significant market share
along with small number of other niche players.
Monopoly- In this market structure, there is only seller which has the complete market share as no
other firm is allowed to sell.
b) Similarity in the products sold
Perfect Competition – The products sold are completely homogeneous and hence no differentiation
is possible.
Monopolistic Competition – There is product or service based differentiation amongst the different
sellers but price based competition is minimal.
Oligopoly – While the products offered are similar, but differentiation tends to exist in terms of
set b

brand and price with regards to the sellers.
Monopoly- As no other seller exists in the market, hence the differentiation is assumed to be the
highest.
c) Barriers to entry
Perfect Competition – The sellers can easily enter the market as there are no barriers to entry.
Monopolistic Competition – There are some entry barriers but do not serve as a significant deterrent
for new entrants.
Oligopoly – There are significant entry barriers on account of capital expenditure, branding,
presence of competitors which makes it quite difficult to enter for a new player.
Monopoly – The barriers to entry are the highest and hence no other firm may enter this market.
Question 2
Based on your understanding of each market structure described in Question 1, state which market
structure you think each of the following businesses belong to.
Explain your choice with a short description of which characteristics of the chosen maket structure
they display. Answers with no explanation will score only half the marks.
i. Aldi Supermarket in your city
ii. A tatoo parlour in your citywhich promotes itself to be perfect for females wanting tatoos.
iii. Crown Casino in Melbourne
iv. Commonwealth Bank of Australia
v. Academies Australasia Polytechnic
vi. A small store among many other similar stores in your city’s Sunday market that sellsouvenirs
that are almost identicalsuch as wallets, caps, tee-shirts, key chains.
vii. A café in Melbourne or Sydney selling fresh cakes, coffe and tea
viii. Iphone and Samsung in the mobile phone industry
(8 marks)
Answer to Question 2
i) Oligopoly market since the retail industry only has limited players (sellers) with entry barriers
being quite high.
ii) Monopolistic competition since the entry barrier is not very high and also service based
differentiation is prevalent between various tatoo parlours situated in the city.
iii) As there is limited number of casinos in Melbourne and these require permit from
government, hence this would belong to oligopoly and also there is entry barrier.
iv) Oligopoly since there are only few players in this industry owing to entry barriers being large
such as approval from regulator, high capital expenditure etc.
set b