Market Structures Essay

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The characteristics of a market, its principles and structure which affect the nature of competition and pricing are known as market structures. The market structures are competitive markets, monopolies, and oligopolies and all of these have both advantages and limitations of supply and demand. Each type of market structure has as main concern maximizing profit by subtracting the total cost from the total revenue, and this is being determined in each market structure by different measures. A competitive market is characterized by numerous buyers and sellers who offer homogeneous products and the prices for these products are being established by the market. The high competition in this type of market leaves the sellers with a very low bargaining power, and the cost of a product or service is established by how much the buyers are willing to pay, as well as by how much the sellers are willing to sell the goods or the services for. Businesses have no barriers to enter or exit the market and companies tend to operate at a marginal cost which equals the marginal revenue, or where they break even on the last unit produced, resulting in a zero profit, or equilibrium, in a long run. In the long-run equilibrium, prices equal to the minimum of the average total costs, and the number of the competitors “adjusts” to ensure the satisfaction of the demanded quantity and that price. In the short run, the increase in demand causes prices to rise and leads to profit, as the decrease in demand lowers prices and causes losses. A monopolistic market is characterized by the existence of only one producer and seller, which dictates the conditions of access and the availability on the market of a product or service, which doesn’t have any close substitutes, term specific to a seller’s market. The absence of competition allows the monopoly firm to control the supply and demand of

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