Assignment Of Comparing Market Structure - Myassignmenthelp.Com

Question: 1. a) Explain what barriers to entry mean. b) Give three examples of barriers to entry and explain how they act as barriers to entry. 2. Compare the market structures of Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly under the following headings (About 250 words). number of firms in the market similarity of the products sold barriers to entry 3. Explain the term Non-price competition and which two market structures experience it the most. 4. State which market structure you think each of the following businesses belong to. Explain your choice. Answer: Answer 1 a) Barriers to entry refer to various obstacles new firms face from entering into market of a new business or industry. This might be due to existent of monopoly competition or higher start up cost. b) Common barriers to entry operating in market economy are: Government Regulation: When government regulates output of certain sector such as defense, it is not possible for new firm to enter into production. Higher start up cost or fixed cost: Most common problem faced by new entrants is the higher cost of starting up the production that stops them. Tax benefits to existing firm: Lower tax rate on existent firms creates differences in the production cost as the new firm happens to incur higher cost due to no tax benefit implied on it. Answer 2 Perfect Competition: It is a type of market that has enormous buyers and sellers operating in the market. Number of firms is infinitely many. This makes the firms price taker and every agent has complete information of the market price (Foster, 2014). The products sold in such market are absolutely similar or homogenous and can act as perfect substitute of each other. Consumers as well as producers are rational in their choice and decision-making. There exists no barrier to entry or ext the industry under such market. Monopoly Competition: Here only one seller is ruling the market supply amidst the existence of large number of buyers. One seller hence there is no difference in the features sells the products. Monopolists are the sole price taker. Barrier to entry is higher in monopoly markets. Monopolistic Competition: Number of sellers are few compared to only one monopolist in the monopoly market. Many sellers make the market supply with low market power but their products are differentiated (Nikaido, 2015). The products are not perfect substitute of each other making the competition imperfect. Few barriers to entry and exit are present in the short run and over long run, they vanishes. Oligopolistic Competition: Handful number of seller dominates the market supply. They can form cartels or collusion and act as single price take and enjoying market power like a monopolist. Products sold can be homogenous or differentiated (Scitovsky, 2013). Barriers to entry or exit are high in such market mostly because of government regulation like licensing or presence of economies of scale. Answer 3 Non-price completion refers to the competition based on the other factors of the product produced in specific market other than price. It can be attributes or features of the product, advertisement cost undertaken by the producers or any customer service related dimensions. Monopolistic competition and Oligopolistic competition are the two markets where non-price competition is visible. Answer 4 Coles Supermarket in your city Oligopoly market since Coles is one of the two market share holder of the Australian grocery market business along with Woolworth. McDonalds Restaurant in your city Oligopoly market since it is one of the biggest burger seller besides KFC and Burger King both domestically and internationally. Metro Trains in Melbourne and Sydney Trains Oligopoly market since the metro trains are run by the joint venture among MTR Corporation(60%),John Holland Group(20%) andUGL Rail(20%). It is a form of cartel taking place in oligopolistic market. National Australia Bank- Monopoly market since government is the only owner of it who made every decision about its operation and functions. Academies Australasia Polytechnic Public organization run as part of Academies Australasia Group run by the national government. It is one of the famous polytechnic education providers besides Melbourne Polytechnic and so on hence the market structure for this is oligopolistic. A small stall in one of Melbourne/Sydneys Sunday markets that sells souvenirs such as wallets, caps, tee-shirts, key chains- perfect competition since enormous stalls like that can be installed in the Sunday markets and one such firm is simply facing perfect competition in presence of many buyers, many sellers and similar kind of products. A car workshop or hair salon in your city- Many hair salons can be present in a city. They provide services similar though the quality and pricing may vary. This leads to presence of monopolistic market in the car workshop or hair salon shop. Iphone and Samsung in the mobile phone industry- Monopolistic competition will prevail because both of the product deliver similar utility of mobile phone services but the difference in their features are present. Iphone Samsung are the two big brands among few big sellers of mobile phone enjoying larger consumer base. Answer 5 Diagram A Diagram B The diagram A is applicable to define the demand curve facing perfect competition. Perfect competition appears in a market, which has many buyers, and many sellers operating in the market structure and transaction made around similar goods having no difference on both the price and non-price basis. This makes the firms face completely elastic demand where for one unit change in price the demand changes infinitely. At given price consumers are willing to buy infinite units but if price rises by small level, and then the consumption would fall to zero making the elasticity infinite. On the other hand, the downward sloping steep demand curve is faced in the monopoly market where price responsiveness is lower and demand is inelastic (Dunne, Klimek, Roberts Xu, 2013). Since supply in such market is limited only in the hand of the monopolist, he can charge any price higher than the market price and for one unit change in price demand would not fall that much because the goods are essentia l to be consumed or the limited supply in presence of more demand allows consumers to pay higher price. = 1/dp/dq * p/q [dp/dq= slope of the demand curve] For perfect competition, e= (perfectly elastic demand) leading dp/dq=0 that makes the demand curve sloped horizontal. For monopoly market, e Reference Dunne, T., Klimek, S. D., Roberts, M. J., Xu, D. Y. (2013). Entry, exit, and the determinants of market structure.The RAND Journal of Economics,44(3), 462-487. Foster, J. B. (2014).The theory of monopoly capitalism. NYU Press. Nikaido, H. (2015).Monopolistic Competition and Effective Demand.(PSME-6). Princeton University Press. Scitovsky, T. (2013).Welfare Competition(Vol. 103). Routledge.