Perfect competition, monopolistic competition, oligopoly and monopoly Assignment

Perfect competition, monopolistic competition, oligopoly and monopoly - Assignment Example Such market structure reduces output in order to drive up prices and hence increase profits (Tragakes, 2012). Such a firm, therefore, produces less than the socially responsible level of output and manufactures at greater costs than competitive firms. Oligopoly is an industry that has only a few firms that can collude to decrease costs and drive up profits just like monopoly. However, such firms may end up cheating against each other due to strong incentives to cheat on such collusive agreements. Finally, monop0listic competition is an industry that contains many competing firms. The firms sell a similar or identical but at least somewhat different product. The products are highly differentiated in terms of features and prices (OConnor, 2004). The paper discusses the features or characteristics of the dour basic market structures. It then explains the key differences and similarities between the markets in terms of output and price determination. Further, the paper explains whether the allocative and productivity efficiencies can be achieved in the monopoly and perfect competition. The market has numerous sellers and buyers who buy, this reduces the bargaining power that buyers and sellers have, for instance if a seller of Milk tries to increase its profits by increasing the price of milk, the buyers in the market shifts to other milk sellers. The sellers are simply price takers and not price makers. The products sold in such a market are almost the same or identical as other. The products are indistinguishable from each other because they are perfect substitutes for each other. The products are perfectly similar in quantity, quality, size and shape. Commodities like corn, oil and wheat are examples of homogenous products (Kurtz & Boone, 2011). Buyers and sellers are totally free to enter and leave the market. There is no restriction imposed on the entry and exit of buyers and sellers. The firms get normal