The paper "Perfect Competition and Monopoly Market Structures" is an engrossing example of coursework on macro and microeconomics. In any market structure, there have to be firms that produce products that are identical and homogenous. These types of market structures include competitive markets, oligopoly, and monopoly. This paper majorly bases on perfect competition and monopoly market structures and their contribution to the economy of a nation. It also identifies short and long-run effects of both market structures Perfect competition market structure Perfect competition is a market situation where the following conditions are applied. There are many buyers and sellers in the market therefore no firm can have control of the prices over the others All the buyers and the sellers are after profit maximization Both the buyers and the sellers are free to enter and leave the market Both the buyers and the sellers have enough information regarding the prices, the quality, and the availability of good being sold in the market All the goods being sold are homogenous therefore they are a substitute for each other. In the short run, firms in the competitive market structure make some profits before attracting other new firms which creates more competition in the long run therefore reducing the profits.
This situation is shown in the diagram below, where the price or average revenue denoted by P is above the average cost denoted by C In the long run, a profit that was made by the firms cannot be sustained. Expansions of the existing or entry of new firms in the market will cause a downward shift of demand of every firm, therefore, making a downward shift of the prices and also that of marginal revenue and average revenue curve.
The end result is that in the long run, all the firms will make normal profits only(Clifton, 2006). The horizontal curve will touch the average curve at its lowest level as shown in the diagram below. Monopoly market structure This is a market structure where there is only one single seller that produces a product that has no other substitute. The single seller of the product or service can be an individual owner, partnership, or a company. Monopolist makes the price in the market and controls the supply of goods in the market
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