Economics Assignment: Analysis of Market Structures and Profitability

This economics assignment delves into various market structures, including perfect competition, monopoly, and oligopoly. It examines the characteristics of each structure, such as the number of firms, product differentiation, and barriers to entry. The assignment also explores how firms in different market structures determine their pricing and output levels to maximize profits. It highlights the role of marginal costs and average costs in decision-making, illustrating how firms earn economic profits or incur losses depending on their pricing strategies and cost structures. The assignment references relevant sources to support its analysis, providing a comprehensive overview of market structures and their implications for businesses and consumers. The document is a contribution to Desklib, a platform for students to access AI-powered study tools and solved assignments.

ECONOMICS

Perfect competition
market structures
Monopoly Oligopolistic market
structures
Monopolistic market
structures
Single seller does
not have power.
All the companies
sell homogenous
goods (Nakandala,
Lau, & Zhang,
2020).
There is free exit
and entry to market
In this structure,
single firm has
highest level of
control in entire
market.
The government
only controls these.
For example- Indian
railway
It possess high
barriers to exit and
entry.
As they result in
lower outputs then it
has higher price as
compared to
competitive markets
(Lumenlearning,
2019).
Products offered by
oligopoly market are
homogenous and
differentiated.
Few firms dominate
the market.
Oligopoly consists
of majorly 3-5
dominant
organisations
(Nakandala, Lau, &
Zhang, 2020).
It holds certain level
of market power.
This power allow
them to change their
price at certain level.
The entry and exit to
market is free
Consumers can
prefer another
product to one item.
For example-
cereals, which have
different brands.
Most of them taste
slightly different
from one another.

For perfect competition market, the thumb rule of profit maximising in competitive firms is
to produce a certain level of output when marginal costs=marginal revenue.
The above diagram shows that marginal costs is above Total average costs. If the
organisation`s price is higher than the average costs then company will earn profits.
For the monopoly market, fixed costs is quite higher, which sufficiently aloe them to have
greater access to profitability (Lumenlearning, 2019).
If price is greater than average total costs then the organisation will earn economic profit. If
price is equal to average total costs, then firms will earn zero economic profit. At last, if price
is less than average total costs then organisation will incur loss.

References
Lumenlearning, (2019). Monopolistic Competition. Retrieved from:
https://courses.lumenlearning.com/boundless-economics/chapter/monopolistic-
competition/
Nakandala, D., Lau, H., & Zhang, J. (2020). Pricing of fresh food enterprises in different
market structures. Enterprise Information Systems, 1-22.