The paper "Current Market Structures" is a great example of a report on macro and microeconomics. The current market structures strongly exhibit that international trade is widely changing which has resulted in firms enjoying fewer market powers than before. Business organizations are moving from being price setters to price takers. For instance, initially, firms had immense market power; had power over terms and conditions of exchange, currently, this power is increasingly diminishing thus rendering firms less powerful in the marketplace. Considering how the international market is changing the paradigm of market structures, this paper seeks to describe how firms’ market power is being reduced through the utilization of economic principles of perfect competition, monopolistic competition, oligopolies, and monopolies as well as consumer surplus and producer surplus. Perfect competition This is a theoretical market structure that is used as a reference point against which other real market structures are compared.
In this market structure, no firm is considered large enough to possess the market power to set the price of homogeneous products (Arnold, 2013). This is mainly due to the fact that perfect competition conditions are strict (Boyes, 2011).
Perfect competition market structure is characterized by conditions such as: All market players sell an identical product All firms are price takers; they have no power to control the market price of their commodity Market players have a relatively small market share Buyers have complete information with regard to the product being sold together with the price that each firm charges, and The industry has neither entry nor exit barriers. Under this scenario, there are many buyers and consumers, and hence the market price shows a perfect reflection of supply and demand.
Accordingly, consumers have many perfect substitutes in the event that the product or service they wish to purchase becomes too expensive or the quality is compromised (Arnold, 2013). This scenario also allows new companies to easily enter the market, which on the other hand generates additional rivalry (Gottheil, 2013). Similarly, this market structure only allows firms to earn enough profit to maintain their businesses or for survival; this is mainly because if they earn more profits they risk other companies entering the market which will eventually drive the profits down or to the minimum (Boyes, 2011).
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Gottheil, F. (2013). Principles of economics, 7th Ed. London: Cengage Learning
Kumar, N., & Siddharthan, N. (2013). Technology, market structure and internationalization: Issues and policies for developing countries. London: Routledge Publishers
McEachern, W. (2012). Economics: A contemporary introduction, 10th Ed. London: Cengage Learning
Vagliasindi, M., & Besant-Jones, J. (2013). Power market structure: Revisiting policy options. New York: World Bank Publications