Market Structure And The Role Of Government Case Study
Market Structure and the Role of Government
1. Explain the unique characteristics of the four primary market structures. The four primary market structure are perfect competition, monopolistic competition, oligopoly, and monopoly (Quickonomics, 2017.). Each of these four characteristic of the market structure has a great influence on the decision-making and the profits (Quickonomics, 2017.). In perfection, this is a situation by which a large number of small firms compete against each other. Similarly, in monopolistic competition, also refers to a market structure, that consist of many competitions that compete against each other but it is slightly different from perfect competition in products. Furthermore, in oligopoly competition, the market is mainly controlled by only a small number firms. Lastly, a monopoly market structure is a market whereby a single firm controls the entire market. For example, the firm that has the highest level of market power, because the consumers do not have other choices, the monopolist will strategically lessen the output in order to raise the prices so to gain more profit (Quickonomics, 2017). …show more content…
In the market in which demand is high, the potential profit from supplying to a market increases, leading to an expansion in supply to meet rising demand from consumers. In such cases, the government can intervene in the price mechanism largely on the grounds of wanting to change resource allocations and achieve what they perceive to be an improvement in economic and social welfare. Various that the government can intervene are to provide information and assure information flows, combat externalities, provide public goods, control noncompetitive behavior and change income distribution. The first four interventions are mainly to enhance optimality. The fifth intervention focus is to meet the society desires to drive and guide the economy to an extent (Pettinger,
1. Explain the unique characteristics of the four primary market structures. The four primary market structure are perfect competition, monopolistic competition, oligopoly, and monopoly (Quickonomics, 2017.). Each of these four characteristic of the market structure has a great influence on the decision-making and the profits (Quickonomics, 2017.). In perfection, this is a situation by which a large number of small firms compete against each other. Similarly, in monopolistic competition, also refers to a market structure, that consist of many competitions that compete against each other but it is slightly different from perfect competition in products. Furthermore, in oligopoly competition, the market is mainly controlled by only a small number firms. Lastly, a monopoly market structure is a market whereby a single firm controls the entire market. For example, the firm that has the highest level of market power, because the consumers do not have other choices, the monopolist will strategically lessen the output in order to raise the prices so to gain more profit (Quickonomics, 2017). …show more content…
In the market in which demand is high, the potential profit from supplying to a market increases, leading to an expansion in supply to meet rising demand from consumers. In such cases, the government can intervene in the price mechanism largely on the grounds of wanting to change resource allocations and achieve what they perceive to be an improvement in economic and social welfare. Various that the government can intervene are to provide information and assure information flows, combat externalities, provide public goods, control noncompetitive behavior and change income distribution. The first four interventions are mainly to enhance optimality. The fifth intervention focus is to meet the society desires to drive and guide the economy to an extent (Pettinger,