ECO 561 week 3 team deliverable
Learning Team Deliverable
Michelle Redd and Russell Rood
ECO/561 Economics
April 6, 2015
Week 3
This week we learned that industries consist of all firms making similar or identical products. Their market structure depends on the number of firms in the industry and the ways in which they compete. Our text discussed four basic market structures.
The first market structure is perfect competition. Perfect competition occurs when numerous small firms are in competition with each other. Businesses in a competitive industry produce the socially optimal output level at the absolute minimal possible cost per unit.
Another type of market structure is known as a monopoly. This is an easy enough concept to comprehend, but I went back and forth with a few classmates as to different examples of a monopoly. Technically, a monopoly is a business that basically has no competitors in its industry. They reduce output to drive up prices and increase profit. In doing so, they produce less than the socially optimal output level and produces at higher cost than competitive businesses. One example of a monopoly would be the existence of only one option in utilities in any particular region.
The third type of market structure is known as an oligopoly. This is a type of industry that has very few firms, and if they collude they can reduce output and drive up profits much like a monopoly does. This doesn’t always work though because a lot of times businesses will not honor their agreement with their competing industries. This will make the firms end up competing against each other for consumers business. An example of this type of structure would be the airline industry. This type of situation often benefits consumers.
The fourth type of market structure is a monopolistic competition. In this type of structure industries have slightly different products, but still compete against one another. One example of this would be restaurants, and how they all serve food, but different
Michelle Redd and Russell Rood
ECO/561 Economics
April 6, 2015
Week 3
This week we learned that industries consist of all firms making similar or identical products. Their market structure depends on the number of firms in the industry and the ways in which they compete. Our text discussed four basic market structures.
The first market structure is perfect competition. Perfect competition occurs when numerous small firms are in competition with each other. Businesses in a competitive industry produce the socially optimal output level at the absolute minimal possible cost per unit.
Another type of market structure is known as a monopoly. This is an easy enough concept to comprehend, but I went back and forth with a few classmates as to different examples of a monopoly. Technically, a monopoly is a business that basically has no competitors in its industry. They reduce output to drive up prices and increase profit. In doing so, they produce less than the socially optimal output level and produces at higher cost than competitive businesses. One example of a monopoly would be the existence of only one option in utilities in any particular region.
The third type of market structure is known as an oligopoly. This is a type of industry that has very few firms, and if they collude they can reduce output and drive up profits much like a monopoly does. This doesn’t always work though because a lot of times businesses will not honor their agreement with their competing industries. This will make the firms end up competing against each other for consumers business. An example of this type of structure would be the airline industry. This type of situation often benefits consumers.
The fourth type of market structure is a monopolistic competition. In this type of structure industries have slightly different products, but still compete against one another. One example of this would be restaurants, and how they all serve food, but different