MGE1108 Economics for Business: Market Structures and Competition

This economics assignment provides a comprehensive analysis of various market structures, including perfect competition, monopolistic competition, oligopoly, and monopoly. It explores the characteristics of each market structure, such as the number of firms, product differentiation, and barriers to entry. The assignment also delves into game theory, using the prisoner's dilemma as an example, and discusses the kinked-demand curve theory in the context of oligopolies. Furthermore, it examines price discrimination strategies and provides real-world examples of different market structures in Melbourne and Sydney, such as supermarkets, cafes, transportation, and banks. The assignment concludes with an analysis of demand curves for monopolistic competition and oligopoly, highlighting the factors that influence pricing and market behavior.

Economics
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Economics 1
Contents
Question- 1.......................................................................................................................................2
Question- 2.......................................................................................................................................3
Question- 3.......................................................................................................................................3
Question- 4.......................................................................................................................................3
Question- 5.......................................................................................................................................4
Question- 6.......................................................................................................................................6
References........................................................................................................................................8

Economics 2
Question- 1
Basis Perfect
Competition
Monopoly Monopolistic
Competition
Oligopoly
Number of
firms in the
market
In the perfect
competition, there
is presence of
large number of
small firms who
compete with each
other in the market
(Johnson, 2018).
In the monopoly
the market include
single firm who
control the entire
market with the
maximum level of
the market power.
In this market
structure, there is
availability of large
number of small
firms who compete
with other
companies present
in market.
Oligopoly
market structure
includes small
number of firms
who compete in
the market.
Similarity
of the
products
sold
This has been
found that
generally firm sells
the completely
identical goods to
the customers.
There is no
similarity of the
products available
in the market.
There is lack of
similarity in the
products which are
sold as most of the
companies sell
differentiated
products.
The products
which are
offered by the
company remain
homogenous or
differentiated.
Barriers to
entry
There is no barrier
to entry as it has
free entry and exit
to the market.
There is presence
of high barriers to
entry and exit of
the companies in
The organisation
can enter easily as
there is free entry
and exit of firms in
The organisation
can enter easily
as there is free
entry and exit of

Economics 3
market. market. firms in market.
Question- 2
The game theory refers to a theory, which predicts the games of strategies, where
contestants have partial data regarding the intention of other people. Mostly, oligopoly
market structure experiences the game theory. The dilemma of prisoners is best example of
game theory. This is a situation, in which two criminals are asked for culpability.
Question- 3
The Kinked-demand curve theory refers to the financial theory in respect of monopolistic and
oligopoly. It was a primary attempt to describe fixed price (Becker, 2015). The smartphone
market is best example of oligopoly with two major manufacturers like Apple and Samsung, and
others in smartphone market. The oligopoly increases the profit and fixes the price.
Question- 4
Price discrimination- The price discrimination refers to the strategy of pricing. According to this,
consumers are charged different price for similar services and products (Johnson, 2018). For an
example, the entertainment industries practice third degree price discrimination; consumable
goods industries practice second-degree price discrimination and the client services practice first-
degree price discrimination.

Economics 4
Question- 5
a. Woolworth supermarket chain in your city (Melbourne/Sydney).
Oligopoly market structure is appropriate for the Woolworths as it dominate the market and
competes against the Coles (Woolworths, 2018).
b. A Coles supermarket in a small town in country Victoria or NSW
Oligopoly market structure is appropriate for Coles as it compete with Woolworths at small
town in country Victoria. Both the supermarket compete in most of the market.
c. A small café in Melbourne/Sydney CBD
Perfect Competition market stsructure is choice for the café as there are numerous café who
are operating their business with similar products in Melbourne/Sydney CBD.
d. Yarra Tram in Melbourne or Sydney Trains in Sydney
The market structure for the Yarra Tram is oligopoly as it is dominated by metro as well as
the Yarra Tram in Melbourne. Further, the market of Melbourne doesn’t include monopoly
market structure.
e. Australia New Zealand Bank
Perfect Competition is approcpriate market structure for the company as there are different
companies who are working in the banking sector with similar sort of services.
f. Academies Australasia Polytechnic

Economics 5
The market structure is selected for the AAP is Monopolistic Competition as there are many
companies who compete against each other in the market with different services.
g. A small store among many other similar stores that sell souvenirs such wallets,
caps, tee-shirts, key chains souvenirs that are almost identical in your city’s
Sunday market.
The small store is maitaining the Perfect Competition market struture in which the firm is
offering similar products like other companies with the presence of large number of buyers
and sellers.
h. Iphone and Samsung in the mobile phone industry
Oligopoly market structure is appropriate for IPhone and Samsung as the market is
dominated by small firms with the limited competition.

Economics 6
Question- 6
Diagram A reflects that the demand curve is the monopolistic competition; it is a type of
imperfect competition with many producers who sell the products that are differentiated from
one to another. The demand curve for the monopolist’s product is sloping downward and it is
difficult to make the statement about the elastic or inelastic of the firm. The rise in the price of
the item leads to the fall in the quantity demanded (Pettinger, 2017). The monopolistic firm keep
the control on the prices of the products which makes the products distinguished from the
competing company’s products. If in case the firm’s product remains similar then company will
find elastic demand curve with the less control on price the company charge. In case the
company offer the differentiated product then it is able to maintain the inelastic demand curve
comparing it with the competitors.

Economics 7
Diagram B states the position of the oligopoly demand curve as it has been found that their
relative price stability. In the oligopoly business majorly focuses on the non-price competition as
it is strengthening their market position and raising their supernormal profits. This has been
found under oligopoly there is indeterminate because of interdependence of other organisation
with the absence of well-defined products and services. This shows that is hard to take the
decision of the demand curve of an oligopolistic. This has been found that we cannot make use
of the downward sloping curve as oligopolistic which is not a monopolist.

Economics 8
References
Becker, G. (2015). Kinked Demand Curves. Wiley Encyclopedia of Management, 1-1.
Johnson, P. (2018). New firms: An economic perspective. New York: Routledge.
Pettinger, T. (2017). Monopolistic Competition – definition, diagram and examples. Retrieved
from: https://www.economicshelp.org/blog/311/markets/monopolistic-competition/
Woolworths. (2018). Market Structure. Retrieved from:
https://orreconomics.weebly.com/market-structure.html