Understanding Market Structures and Competition

This solved economics assignment explores various market structures, including perfect competition, monopoly, monopolistic competition, and oligopoly. It delves into the characteristics of each structure, provides examples, and analyzes demand curves in different market settings. The assignment also includes diagrams illustrating key concepts and a reference list for further reading.

Running head: ECONOMICS ASSIGNMENT
ECONOMICS ASSIGNMENT
Name of Student:
Name of University:
Author Note:

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ANSWER 1
a)
Barriers to entry refer to various obstacles new firms face from entering into market of a
new business or industry. This might be due to existent of monopoly competition or higher start
up cost.
b)
Common barriers to entry operating in market economy are:
 Government Regulation: When government regulates output of certain sector such as
defense, it is not possible for new firm to enter into production.
 Higher start up cost or fixed cost: Most common problem faced by new entrants is the
higher cost of starting up the production that stops them.
 Tax benefits to existing firm: Lower tax rate on existent firms creates differences in the
production cost as the new firm happens to incur higher cost due to no tax benefit implied
on it.
ANSWER 2
Perfect Competition: It is a type of market that has enormous buyers and sellers operating
in the market. Number of firms is infinitely many. This makes the firms price taker and every
agent has complete information of the market price (Foster, 2014). The products sold in such
market are absolutely similar or homogenous and can act as perfect substitute of each other.

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Consumers as well as producers are rational in their choice and decision-making. There exists no
barrier to entry or ext the industry under such market.
Monopoly Competition: Here only one seller is ruling the market supply amidst the existence of
large number of buyers. One seller hence there is no difference in the features sells the products.
Monopolists are the sole price taker. Barrier to entry is higher in monopoly markets.
Monopolistic Competition: Number of sellers are few compared to only one monopolist in the
monopoly market. Many sellers make the market supply with low market power but their
products are differentiated (Nikaido, 2015). The products are not perfect substitute of each other
making the competition imperfect. Few barriers to entry and exit are present in the short run and
over long run, they vanishes.
Oligopolistic Competition: Handful number of seller dominates the market supply. They can
form cartels or collusion and act as single price take and enjoying market power like a
monopolist. Products sold can be homogenous or differentiated (Scitovsky, 2013). Barriers to
entry or exit are high in such market mostly because of government regulation like licensing or
presence of economies of scale.

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ANSWER 3
Non-price completion refers to the competition based on the other factors of the product
produced in specific market other than price. It can be attributes or features of the product,
advertisement cost undertaken by the producers or any customer service related dimensions.
Monopolistic competition and Oligopolistic competition are the two markets where non-price
competition is visible.
ANSWER 4
 Coles Supermarket in your city – Oligopoly market since Coles is one of the two market
share holder of the Australian grocery market business along with Woolworth.
 McDonalds Restaurant in your city – Oligopoly market since it is one of the biggest
burger seller besides KFC and Burger King both domestically and internationally.
 Metro Trains in Melbourne and Sydney Trains – Oligopoly market since the metro trains
are run by the joint venture among MTR Corporation (60%), John Holland Group (20%)
and UGL Rail(20%). It is a form of cartel taking place in oligopolistic market.
 National Australia Bank- Monopoly market since government is the only owner of it
who made every decision about its operation and functions.
 Academies Australasia Polytechnic – Public organization run as part of Academies
Australasia Group run by the national government. It is one of the famous polytechnic
education providers besides Melbourne Polytechnic and so on hence the market structure
for this is oligopolistic.

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 A small stall in one of Melbourne/Sydney’s Sunday markets that sells souvenirs such as
wallets, caps, tee-shirts, key chains- perfect competition since enormous stalls like that
can be installed in the Sunday markets and one such firm is simply facing perfect
competition in presence of many buyers, many sellers and similar kind of products.
 A car workshop or hair salon in your city- Many hair salons can be present in a city. They
provide services similar though the quality and pricing may vary. This leads to presence
of monopolistic market in the car workshop or hair salon shop.
 Iphone and Samsung in the mobile phone industry- Monopolistic competition will
prevail because both of the product deliver similar utility of mobile phone services but
the difference in their features are present. Iphone Samsung are the two big brands among
few big sellers of mobile phone enjoying larger consumer base.
ANWER 5
Diagram A Diagram B
The diagram A is applicable to define the demand curve facing perfect competition. Perfect
competition appears in a market, which has many buyers, and many sellers operating in the
market structure and transaction made around similar goods having no difference on both the

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price and non-price basis. This makes the firms face completely elastic demand where for one
unit change in price the demand changes infinitely. At given price consumers are willing to buy
infinite units but if price rises by small level, and then the consumption would fall to zero
making the elasticity infinite. On the other hand, the downward sloping steep demand curve is
faced in the monopoly market where price responsiveness is lower and demand is inelastic
(Dunne, Klimek, Roberts & Xu, 2013). Since supply in such market is limited only in the hand
of the monopolist, he can charge any price higher than the market price and for one unit change
in price demand would not fall that much because the goods are essential to be consumed or the
limited supply in presence of more demand allows consumers to pay higher price.
e = dq/q
dp/ p
= 1/dp/dq * p/q [dp/dq= slope of the demand curve]
For perfect competition, e= ∞(perfectly elastic demand) leading dp/dq=0 that makes the demand
curve sloped horizontal.
For monopoly market, e<1 (inelastic demand) leading to dp/dq greater that makes the demand
curve steeply sloped.

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REFERENCE
Dunne, T., Klimek, S. D., Roberts, M. J., & Xu, D. Y. (2013). Entry, exit, and the determinants
of market structure. The RAND Journal of Economics, 44(3), 462-487.
Foster, J. B. (2014). The theory of monopoly capitalism. NYU Press.
Nikaido, H. (2015). Monopolistic Competition and Effective Demand.(PSME-6). Princeton
University Press.
Scitovsky, T. (2013). Welfare & Competition (Vol. 103). Routledge.