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ECO204 Final Paper Structures-Four Market Structures






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Title: Insight to the Four Markets
ECO204: Principles of Microeconomics (BWE1311A)

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This paper is written concerning micro-economics and how through the four market structures
(perfect competition, monopolistic competition, oligopoly, and monopoly) they can affect our
daily lives. As we look at the different structures I will separate and outline each of them
separately and give examples of how they are being used today.
Perfect competition consist of six basic assumptions, they are as follows: having many sellers
and buyers, having a similar or near identical product, free entry and exit into the market, having
perfect knowledge, and having near unlimited resources.
Now let’s say you own a plastic injection molding company, and it was very expensive to set up.
You are in perfect competition with your competitors but new companies will have a hard time
entering the market. For the long run profitability this is a great set up. The cost efficiency is
easy to manage since the market determines the price and all you have to do is keep the cost
below your average profit. On the other hand competitors that have higher cost, maybe a bigger
facility to manage may not survive during a price increase in raw materials. In this instance
having entrepreneurs try to develop substitutes for the product would not make much difference
in the market.
Shifting to monopolistic competition, and how having many sellers will affect the market.
“Each of these sellers offers a differentiated product,
which is a good or service that has real or imagined characteristics that are

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different from those of other goods or services.” (AUECO204.13.1) These changes to make their
product different could be as simple as better customer service or having a famous person
represent the product. Anything really that will make it stand out as better than its competitors.
Lets talk about a new trendy business. E-cigs or electronic cigarettes are all the rage. They all do
the same basic thing. They combine water and nicotine with flavors and vaporize the liquid using
an atomizer. This market is in compliance with monopolistic competition since it is easy to enter
with no FDA regulations on the product and there are many people that smoke and may want to
try the product. Now let’s say you want to enter the market but there’s a high barrier to enter
from a select few taking over key advertising space. The cost of not being able to get your
product seen by the masses in the long run could be detriment to your company. While others
such as Blue or Cloud sell their product mostly online and therefore will have low retail cost and
higher profit. But let’s say that you develop a new design where the tube is clear and you can see
the inner workings. In a monopolistic market the product will either be accepted by the consumer
or rejected for a more popular brand.
Oligopoly, this is the
“marketstructure in which a few firms compete imperfectly. The scarcity of sellers is the key to fi
rms' behavior in oligopoly. In
oligopoly, firms realize thattheir small number produces mutual interdependence. As a result, eac
h firm will forecast or expect a certain response from its rivals to any price
or output decision that it might make.
Oligopoly is the market structure in which there are only a few firms or a few firms dominate the
market.” (AUECO204.13.1) A good example of this for today’s market would be the new OS’ for
mobile devices. Since PDAs came out Microsoft has been testing out its capability with

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