Market Structures

Group 8

The Four Types of Market Structure

Number of Firms?
Many
firms
Type of Products?

One
firm

Monopoly
Tap water
Cable TV

Few
firms

Oligopoly
Tennis balls
Crude oil

Differentiated
products

Monopolistic
Competition
Novels
Movies

Identical
products

Perfect
Competition
Wheat
Milk

MONOPOLISTIC COMPETITION
Many firms sell similar but not
identical products.

Major Sectors
Monopolistic competition is
commonly found in many field in
retail, service and manufacturing
industries.
Examples of retail:- clothe stores,
electrical appliances, etc.
Service Industry:- restaurants,
beauty saloons, health clubs, etc.
Manufacturing:- shoes, garments,
cosmetics, furniture manufacturing
, etc.
26-4

Characteristics & Examples

of Monopolistic Competition

Characteristics:
Many sellers
Product differentiation
Free entry and exit
Large number of buyers

Monopolistic Competition
Many Sellers
There are many firms competing for the
same group of customers.
Product examples include books, CDs,
movies, computer games, restaurants, piano
lessons, cookies, furniture, etc.

Monopolistic Competition
Product Differentiation
Each firm produces a product that is at
least slightly different from those of
other firms.
Rather than being a price taker, each
firm faces a downward-sloping demand
curve.

Monopolistic Competition
Free Entry or Exit
Firms can enter or exit the market
without restriction.

Monopolistic Competition
Large number of buyers:
Unlike perfect competition, here buying is by choice
and not by chance