Market Structures

Market Structures

Introduction

In this paper, we will have to present a discussion on the market structures theory by comparing the factors that influence and determine how managerial decisions are made for a firm or industry that operates in an environment that is considered to be highly competitive (such as pure competition or monopolistic competition) in comparison of a firm that operates in a more highly concentrated environment (such as oligopoly or pure monopoly) where a few firms or a single firm dominates.

The market structure in an economic environment is divided mainly in four types; such as the monopolistic competition, oligopoly, monopoly, and the perfect competition. These types of markets are different from each other in terms of the number of active enterprises, the height of barriers to entry faced by new firms, and the impact of individual producers on the price level of the product or service. In the case of perfect competition or monopolistic competition, the market is provided with many manufacturers. In both of these market structures, the new companies can easily enter the market since there is not barrier to entry in the market.

On the other hand, in the case of monopoly, the single enterprise is the only one to produce the product or service to the industry. There are no direct competitors to the firms which operate in the monopoly market. On the other hand, oligopoly is an intermediate state since there are some firms which operate in a concentrated market and there is the barrier to entry of the new firms. Hence, the new firms cannot enter easily in an oligopoly market. We will discuss on all of these four structures in detail by analyzing the theory of economic environment.

Discussion

There are some companies or firms who do not have any competitors since they are the only ones to provide a product or service in a particular market. Hence, they are known to enjoy the monopoly in that particular market.

Economies of scale in production occur when the manufacturer produces certain products, or provides certain services at a lower total cost as compared to the market which has more than one manufacturer. Economies of scale in production are associated with high fixed costs (short-term) and factors of production in the long run. With the transfer of certain industries and the mass production and the use of automation, the economies of scale in production processing industries increase. Economies of scale in the power sector are a prerequisite for the construction of power plants and increasing capacity of large power plants premise. One factor that can generate electricity to reduce or eliminate the scale effect is technological progress, which can lead to the construction of small power plants with high support (Jean-Luc 2006, 175).

The strength of the price impact of the company also depends on the structure of the market. Typically, the enterprise which operates in a perfect competition market is so small that there is no impact on pricing, but rather on the market through supply ...