Even if they look different and have different fragrances, the product has the same use. For example, you must have seen different brands of shampoos. This differentiation could be based on quality, packaging, color, etc. Product Differentiation is an important characteristic of Monopolistic Competition. Under monopolistic competition, a large number of firms sell closely related products. The monopolist firm can sell different quantities of a similar product to a consumer at different prices or the same quantity to different consumers at different prices by judging the standard of living of the consumer. Also, once a monopoly firm starts producing the product, no other firms produce the same.īeing a single seller of the product, the monopolistic firm has full control over the price of the product. Under Monopoly competition, there is a strong barrier for the other firms to enter the market. There is no substitute for the products produced by monopolistic firms. Being a single firm, there is complete control over the supply and price of the product. Under Monopoly competition, there is only one firm producing the product. ![]() The goods are similar in terms of quality, size, packing, etc. This implies that buyers do not have any basis to prefer the goods of one seller over the goods of another seller. Under perfect competition, The products offered by different firms are homogeneous. Under perfect competition, firms can't charge high prices as both sellers and buyers have perfect knowledge about the goods and their prices. This means that there is no obstruction for a new firm to produce a similar product produced by the existing firms in the market Under perfect competition, firms are free to exit and enter the market at any point in time. They have to sell the products at a price predetermined by the industry. Uner competition, the firms have no control over the price. Under perfect competition, there are a large number of buyers and sellers in the market. The different characteristics of four types of market structure are as follows: Perfect Competition The examples of four different types of market structure are discussed below: Perfect Competition ExamplesĬharacteristics of Types of Market Structure However, the most powerful firms often have patents, finance, physical resources which control over raw materials that create barriers to entry for new firms. The companies under oligopoly market structures can be small or large. Oligopolies have companies that collaborate, or work together, to limit competition and dominate a different market or industry. Oligopoly Competition Market structur e: Not all companies aim to sit as a single building in a city. The supplier is the price-maker, setting a price that increases profits. High barriers to entry into the monopoly market leave a "mono-" or lone company standing so there is no price competition. Where there are many competitors in perfect competition, in monopolistic markets, there's just one supplier. However, both minimize cost and maximize profit. ![]() Monopoly Competition Market Structure: Monopolies and completely competitive markets sit at either end of market structure extremes. The companies under a monopolistic competition structure sell very similar products with slight differences they use as the basis of their marketing and advertising. That little difference in the definition leaves room for huge differences in how the companies operate in the market. Monopolistic Competition Market Structure: Unlike perfect competition, monopolistic competition does not assume the lowest possible cost of production. Perfect Competition Market Structure: In a perfectly competitive market, the forces of supply and demand determine the number of goods and services produced as well as market prices set by the companies in the market. The four different types of market structure are discussed below: ![]() In this article, we will discuss the four different types of market structures namely perfect competition, monopolistic competition, monopoly, and oligopoly. Market structure makes it easier to understand the different characteristics of diverse markets. Market structure means how firms are differentiated and categorized based on the type of goods they sell (homogeneous/heterogeneous) and how their functions and operations are affected by external factors and elements.
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