Differentiating Between Market Structures

This paper will analyze the four market structures:   monopoly, oligopoly, monopolistic competition, and perfect competition; determine how the market structures affect supply and demand; compare and contrast public goods, private goods, common resources, and natural monopolies; determine which structure is more effective and the efficiency of the market in providing the goods.   In recent economical study the market structures are described as: Monopoly-single seller which has control over price; Oligopoly-a few large sellers that has some control over price; Perfect Competition-no power to influence price with many buyer and sellers of standardized products; Monopolistic Competition-large number of companies with small portion of profit share.  
In the government’s effort to provide economic well-being, it has constructed a solution that improves the outcome of the economy in the form of market systems.   All market systems consist of sellers and buyers.   However, one system creates boundaries that can be challenging for the government; called the free market system. The government allocates goods and services for everyone to use without barriers to consumption.   When goods have no monetary price it will often cause the public to overuse the good or service.   When a person receives the benefit of a good without having to pay for it, economists consider this a free ride (Mankiw, 2008,p .226).   For example, consider public beaches, there usually considered a free good.   If a town has three private beaches, and only one public beach, the public beach will become over-used.   People will not feel inclined to pay for, and use private beaches.   For this reason, sometimes the government feels inclined to regulate public behavior by imposing property rights and supplying goods that the public needs to balance the economy.   (Pg.236)
    There are three other types of goods that the government has better success at regulating:
• Private goods – goods that are excludable...

Similar Essays