APPLIED ECONOMICS

MARKET STRUCTURE
Market Structure
• is best defined as the organizational and other characteristics of a
market.

Elements of Market Structure

• Number and size distribution
• Entry conditions
• Extent of differentiation
Four basic types of Market Structure
1. Perfect Competition
2. Monopolistic Competition
3. Oligopoly
4. Monopoly
1. Monopoly
• is a market structure in which there is only one
producer/ seller of the product.
Characteristics of Monopoly
• Maximizes profits
• Decides the price of the good or product to be
sold, but does so by determining the quantity in
order to demand the price desired by the firm.
• Other sellers are unable to enter the market of
the monopoly.
 Characteristics of Monopoly
• In a monopoly, there is one seller of the good that
produces all the output. The whole market is being
served by single a company, and for practical
purposes, the company is the same as the industry.
• A monopolist can change the price and quality of
the product. He or she sells higher quantities,
charging a lower price for the product, in a very
elastic market and sells lower quantities, charging a
higher price, in a less elastic market.
2. Oligopoly
• There are only few firms that make up an
industry. This select group of firms has control
over the price.
Characteristics of Oligopoly
• An oligopoly maximizes profits
• Oligopolies are price setters rather than price takers
• The most important barriers are government licenses,
economies of scale, patents, access to expensive and
complex technology and strategic actions by
incumbent firms designed to discouraged or destroy
promising firms.
3. Perfect Competition
• Characterized by many buyers and sellers, many
products that are similar in nature and, as a result,
many substitutes.
Characteristics of Perfect
Competition
• There are no barriers to entry into or exit out of the
market.
• Firms produce homogenous, identical, units of output
that are not branded.
• Each unit of input, such as units of labor are also
homogeneous.
4. Monopolistic Competition
• Is a type of imperfect competition such one or
two produces sell products that are
differentiated from one another as goods but
not perfect substitutes.
Characteristics is Monopolistic
Competition
• There are many producers and many consumers in the market, and no
business has total control over the market price.
• Consumers perceive that there are non-price differences among the
competitors products.
• There are few barriers to entry and exit.
• Producers have a degree of control over price.
APPLIED ECONOMICS

Quiz
From the four market structure, choose 1
among them. Discuss and give 1 example.
Explain your answer in not less than 7
sentences.

(15 Points)