Market Structure and the Role of Government

Abstract

This paper aims to study the economic condition of the health care sector of the United States of America. The different market structures are discussed being applied in the health sector of economy. Their characteristics and their impacts on the demand and supply of the product are also evaluated. The role of public goods in this regard is also discussed, together with the implications of governmental interventions in the health sector to ensure the public safety in terms of their health concerns.

Market Structure and the Role of Government

Unique Characteristics of the Four Primary Market Structures

According to the research, the industries encompass similar companies or firms in terms of identical products. The market structure depends upon the firms included in the industry in terms of their competitiveness. The four basic market structures are;

Perfect competition

A market is in perfect competition with its competitors if it produces the best possible results hypothetically in favor of the consumers and the society. This achievement of best outcome is made sure to be possible at minimum cost per unit.

Characteristics

This structure of market provides open opportunities of entering into or exiting out of the market.

In this competition, companies are producing identical and homogenous output unit with no branding strategy.

There is no impact on the market conditions by the influences of any individual company.

It does not require the implication of governmental regulations excluding the competitiveness of the market.

There are no external costs or benefits.

(www.economicsonline.co)

Monopoly

Monopoly refers to the single supplier in the market, which means that a single company holds 25% of the market economy.

Characteristics

It has a single seller only

It produces unique products with no substitutes

Price controlling is monitored by the company

No entry or exit is allowed

(www.economicsonline.co)

Oligopoly

Oligopoly contains the dominance of specific companies in the market economy. This makes the market to be highly concentrated.

Characteristics

The provision of dominant behavior to the small firms

The reactions of the competitors are effective on the pricing advertising decisions.

The products are standardized

Entry to the market is hard but not blocked

(www.economicsonline.co)

Monopolistic Competition

In this market structure, there are several competitors selling different products. It includes restaurants and stores as they sale slightly different products.

Characteristics

It has a large number of firms in the competition

Sells different products

Provides an easy entry or exit

(www.economicsonline.co)

Economic Profits in the Long Run in a Monopolistically Competitive Market

The economic profits in t he long run in a monopolistic competitive market is zero because of the free nature of the entry into the market and exit out of the market. The profit earning of the existing companies in the market provide opportunity to the other companies for entering into the market. This provides the customers a variety of products, which move the demand curve towards left, and it is moved towards the right when firms exit the market because of the loss to the existing companies. This continuous behavior of the demand curve makes the profits earning zero in this market structure, if long run equilibrium is considered (Dewar, ...