The paper "Market Structure for Buying and Selling Products" is a wonderful example of a report on macro and microeconomics. According to Tucker (2010), market structure refers to the extent to which competition prevails in a given market. The level of competition is mainly determined by the number of buyers and sellers, and by the nature of the products. Additionally, competition is determined by the degree in which information flows in a given market. The structure of a market affects the pricing decisions of firms as well as their profits. The aim of this paper is to describe various market structures and to provide a real-life example of each market. Perfect Competition Perfect competition is a market whereby there are many sellers offering identical products (Lipsey & Chrystal, 2011).
Under this market, the prices of products are determined by the forces of demand and supply. Firms operating in this market are assumed to have perfect knowledge of the prevailing prices. Examples of perfectly competitive markets include the unskilled labor market and the agricultural market for eggs. Tucker (2010) notes that in the long run firms operating in a perfectly competitive market can leave the industry if they earn below normal profits and new firms can enter the market if the existing firms earn abnormal profits.
Thus, high entry barriers in this market will prevent the entry of new firms hence the existing firms will be able to earn supernormal profits in the long run. In a Perfect competition, firms are cost-efficient because they produce at a point where the price is equal to marginal cost (McEachern, 2010). However, high entry barriers cannot influence cost efficiency because firms only produce at a level where the total average cost is at a minimum. The price of a product in a perfectly competitive market is determined by the forces of demand and supply and not by the firms (Tucker, 2010).
Accordingly, inefficient firms may not survive in this market structure even with high entry barriers because they might earn below normal profits. Furthermore, in perfect competition all firms sell homogenous products. However, the fact that firms are price takers means that entrepreneurs may not be motivated to produce substitute products.
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