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Market Structures

In: Business and Management

Submitted By kdtaylorbsn
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There are 4 markets structures in which firms operate: pure competition, pure monopoly, monopolistic competition, and oligopoly. Pure Competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices. Pure Monopoly is one firm or company that controls the whole market whether there may not or may be substitutes. Monopolistic Competition consists of large number of sellers, with differentiated products making it easy to enter to and exit from the industry. Oligopoly is a market dominated by a few large producers of a distinguished product. The behavior of a specific firm in regards to deciding where to price a product and at what production level to produce depend greatly on what type of market structure it operates in.
In pure competition, in order to maximize the profit, a point must be reached when marginal cost, the cost of each additional unit of output, equals marginal revenue, the income of each additional unit of output. The production still continues and will earn a profit, but when the production is increased, the extra productivity costs more than is earned. A pure monopoly is an industry in which a single firm is the sole producer of a specific good or the sole supplier of a service. The product is one of a kind, and there are no close substitutes available. The market of monopolistic competition is in the middle of a perfect competitive market and a pure monopoly, retaining qualities of both. The market is characterized by firms that produce products that are distinguished, and the difference can lead to some monopolized control. An oligopoly is a market where few firms control all or most of the production and sale of a product. Mutual interdependence separates oligopoly from the other market structures, all firms within the market structure are aware of its

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