Economics 1 Assessment
Market Structure
Market structure, in economics, is the way to describe the state of the market with respect to competition. This describes the main characteristics of the market, such as the level of concentration, the extent of entry barriers and the extent of product differentiation. Examples of market structures are monopoly, perfect competition, monopolistic competition and oligopoly. Whichever structure is examined the assumption is that they will always want to maximize profits.
Characteristics of an Oligopoly
An oligopoly is a market form in a market or industry in which there are only a small number of sellers of a particular product. Due to this small number of sellers in this market it enables each seller to be aware of one another and their actions. This results in the decisions of a firm being highly influenced by the decisions of another firm. Company examples of an oligopoly would be Banking and supermarkets. The first characteristic of an oligopoly is that there is a lot of competition. This can give a wide range of outcomes. In some situations, the firms may employ restrictive trade practices to raise prices and restrict production in much the same way as a monopoly. In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approaching perfect competition. The competition in an oligopoly can be greater than when there are more firms in an industry if, for example, the firms were only regionally based and didn't compete directly with each other. The second characteristic of an oligopoly is that there are very few firms in the market. This means that all firms in the market are closely and consistant ...