Economics Assignment: Document

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Added on 2020-03-16

Economics Assignment: Document

Added on 2020-03-16

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Running head: ECONOMICS ASSIGNMENT 1Economics Assignment(Author’s Name)(Institutional Affiliation)

ECONOMICS ASSIGNMENT 21.An economy is characterized by various market structures, the four basic market structures include perfect competition, monopolistic competition, oligopoly, and monopoly. A perfect competition market structure consists of a large number of firms competing. A single firm cannot control the whole market and has limited power in terms of entry barriers. Also, all firms produce identical products. A monopolistic competition also consists of a large number of firms competing against each other. However, the firms in this market structure sell similar products but somewhat differentiated. There is also free entry and exit to the market. An oligopoly is a market structure that is controlled by a small number of firms meaning that it is a situation of limited competition. The products produced may be identical or differentiated and there exist barriers to entry in this market. A monopoly is a market structure where a single dominant firm controls the entire market. In this scenario, the firm can set its prices and control output because consumers don’t have much choice. Also, there are high barriers to entry (Stiglitz, 1993). 2.“Game theory” is a study of determining logically the actions of participants in achievingthe best outcomes when faced with various alternatives. Game theory is common in an oligopoly market structure (" The Concise Encyclopedia of Economics, 2017). In real life, game theory can be applied when striking deals. 3.A kinked demand curve is a standard demand curve with a bend as a consequence of competing firms in an oligopoly market structure (" kinked demand curve, 2017). For example, ever wondered why most petrol stations charge more or less the price of fuel. Competing firms cannot afford to increase their prices (Guru, 2017).

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