Throughout this unit, we go by the assumption that the firms are guided by profit maximisation. A perfectly competitive market has the following characteristics: The products sold by different sellers are homogenous and identical. Think about your purchase of a big ticket item such as a camera.
Institutional postal systems that developed during the later Middle Ages also conveyed letters between private persons, with or without official sanction and for a substantial fee in either case.
Initially, such letters were relatively few. Outside the institutions with their own postal services, the… Types of market structures Competition is directly influenced by the means through which companies produce and distribute their products.
Different industries have different market structures—that is, different market characteristics that determine the relations of sellers to one another, of sellers to buyers, and so forth. Aspects of market structure that underlie the competitive landscape are: Concentration of sellers Seller concentration refers to the number of sellers in an industry together with their comparative shares of industry sales.
A more common situation is that of oligopolyin which the number of sellers is so few that the market share of each is large enough for even a modest change in price or output by one seller to have a perceptible effect on the market shares or incomes of rival sellers and to cause them to react to the change.
In a broader sense, oligopoly exists in any industry in which at least some sellers have large shares of the market, even though there may be an additional number of small sellers. When a single seller supplies the entire output of an industry, and thus can determine his selling price and output without concern for the reactions of rival sellers, a single-firm monopoly exists.
Product differentiation The structure of a market is also affected by the extent to which those who buy from it prefer some products to others. In some industries the products are regarded as identical by their buyers—as, for example, basic farm crops. In others the products are differentiated in some way so that various buyers prefer various products.
Ease of entry Industries vary with respect to the ease with which new sellers can enter them. The barriers to entry consist of the advantages that sellers already established in an industry have over the potential entrant.
Such a barrier is generally measurable by the extent to which established sellers can persistently elevate their selling prices above minimal average costs without attracting new sellers. The barriers may exist because costs for established sellers are lower than they would be for new entrants, or because the established sellers can command higher prices from buyers who prefer their products to those of potential entrants.
The economics of the industry also may be such that new entrants would have to be able to command a substantial share of the market before they could operate profitably. The effective height of these barriers varies.
One may distinguish three rough degrees of difficulty in entering an industry: Market conduct and performance It is helpful to distinguish the related ideas of market conduct and market performance.
Market conduct refers to the price and other market policies pursued by sellers, in terms both of their aims and of the way in which they coordinate their decisions and make them mutually compatible. Market performance refers to the end results of these policies—the relationship of selling price to costs, the size of output, the efficiency of production, progressiveness in techniques and products, and so forth.
The arguments in favour of monopolies are largely concerned with efficiencies of scale in production. For example, proponents assert that in large-scale, integrated operations, efficiency is raised and production costs are reduced; that by avoiding wasteful competition, monopolies can rationalize activities and eliminate excess capacity; and that by providing a degree of future certainty, monopolies make possible meaningful long-term planning and rational investment and development decisions.
Against these are the arguments that, because of its power over the marketplace, the monopoly is likely to exploit the consumer by restricting production and variety or by charging higher prices in order to extract excess profits; in fact, the lack of competition may eliminate incentives for efficient operations, with the result that the factors of production are not used in the most economical manner.
Perfect competition Market conduct and performance in atomistic industries provide standards against which to measure behaviour in other types of industry. The atomistic category includes both perfect competition also known as pure competition and monopolistic competition.
In perfect competition, a large number of small sellers supply a homogeneous product to a common buying market. In this situation no individual seller can perceptibly influence the market price at which he sells but must accept a market price that is impersonally determined by the total supply of the product offered by all sellers and the total demand for the product of all buyers.
The large number of sellers precludes the possibility of a common agreement among them, and each must therefore act independently. At any going market price, each seller tends to adjust his output to match the quantity that will yield him the largest aggregate profitassuming that the market price will not change as a result.
But the collective effect of such adjustments by all sellers will cause the total supply in the market to change significantly, so that the market price falls or rises. Theoretically, the process will go on until a market price is reached at which the total output that sellers wish to produce is equal to the total output that all buyers wish to purchase.
If the provisional equilibrium price is high enough to allow the established sellers profits in excess of a normal interest return on investment, then added sellers will be drawn to enter the industry, and supply will increase until a final equilibrium price is reached that is equal to the minimal average cost of production including an interest return of all sellers.
Conversely, if the provisional equilibrium price is so low that established sellers incur losses, some will withdraw from the industry, causing supply to decline until the same sort of long-run equilibrium price is reached.
The long-run performance of a purely competitive industry therefore embodies these features: This performance has often been applauded as ideal from the standpoint of general economic welfare.Market situation where one producer (or a group of producers acting in concert) controls supply of a good or service, and where the entry of new producers is prevented or highly restricted.
Monopolist firms (in their attempt to maximize profits) keep the price high and restrict the output, and show little or no responsiveness to the needs of their customers. Monopoly and competition, basic factors in the structure of economic metin2sell.com economics monopoly and competition signify certain complex relations among firms in an industry.A monopoly implies an exclusive possession of a market by a supplier of a product or a service for which there is no substitute.
In this situation the supplier is able to determine the price of the product without fear. 1、To formulate and implement strategies of national economic and social development, annual plans, medium and long-term development plans; to coordinate economic and social development; to carry out research and analysis on domestic and international economic situation; to put forward targets and policies concerning the development of the national economy, the regulation of the overall price.
A natural monopoly is a monopoly that exists because the cost of producing the product (i.e., a good or a service) is lower due to economies of scale if there is just a single producer than if there are several competing producers.. A monopoly is a situation in which there is a single producer or seller of a product for which there are no close substitutes.
A monopoly is a situation in which one corporation, firm or entity dominates a sector or industry. A monopoly is a situation in which one corporation, firm or entity dominates a sector or industry.