Melissa Payne 1

Economics 2010
Professor John Inch Morgan
April 24, 2019
Market Structures
Market structure can be defined as the organizational and characteristics of how
businesses operate in an economic environment. Some of the characteristics are, the number of
firms that compete in the market, top firms that share the market, if the product is differentiated
and exit and entry barriers. The four basic types of market structure are, perfect competition,
monopolistic competition, monopoly and oligopoly. In this paper I will reflect the value of
microeconomics and how it affects my everyday life through market structures (Miller).
Perfect competition is a market which any seller can enter or exit on their own free will
and many of the companies sell the same products. The number of firms in a perfect competition
is very large. These firms are so small that they have no market power and the goods they sell are
at market price. Market price is the price at which goods are sold. Perfect competition is used in
everyone’s daily life. At my house there is a farm in my backyard, not my farm but the neighbors
behind me and it is about a 10-acre farm. They sell produce in front of their house during the
summer. This affects me because the price that they sell at is about the same as the grocery store.
The difference is that it is freshly picked vegetables and I do not have to worry about driving to
the store to buy produce. If I do not like the price or produce that they are selling, there are many
other sellers in the same market that I could purchase from at or around the same price. It is
useful to have many sellers to choose from with agriculture products in a perfect competitive
market. Perfect competition market structure produces the best benefit for the lowest cost
because the producers and consumers have no control over the quantity or price of the product
(Miller) (Schiller).
Monopolistic competition is a form of imperfect competition and there are no barriers to
exit or entry. It is a market made up of many firms but stands out with a specific brand image
and its products are differentiated. Monopolistic competitive markets can set their own prices
 2
because their products are differentiated. I understand how these monopolistic competitive firms
work. I have a love for coffee and sometimes it is hard to pick whether I go to Starbucks,
Beans and Brews or try a new coffee café. I do think that it is ridiculous that these places charge
$4-6 dollars for a cup of coffee. I have quit going to these places as much as I used to because of
the prices they charge. The differentiation does increase consumer choice, but the higher prices
also cause lower output to these companies. I now buy more expensive brands of coffee at the
grocery store that taste just as good if not better than Starbucks and Beans and Brews (Miller)
(Schiller).
A monopoly is a firm that supplies the entire market with a certain product or good. This
means that the company has all the market power and the power to set the price for the good. The
seller faces no competition with other markets and there are barriers to entry. Monopolies set
market prices and perfectly competitive firms are price takers. A few monopolies that I use in my
daily life would be, Google, Windows office product and Dominion Energy. I use Google daily,
from looking up recipes to using directions and saving my pictures to my google cloud. Without
google I would probably read more books and get lost when finding a new address. When it
comes to doing my school work, whether it be writing a paper, making a power-point or using
excel, Windows is what I use and have used for years. I would not know who to turn to if
Windows went out of business. Dominion Energy is the only option for gas. I would switch them
out if I had other options. I never realized how many monopolies I use daily. I now know
why Dominion Energy can get away with increasing their price when doing a random “guessing
a meter read,” because there is no other gas company to switch to (Chirila) (Miller) (Schiller).
Oligopoly is a powerful firm they are anticompetitive organizations and they control the
industry. Oligopolies are strong enough to stop other firms from entering the market and making
their share of the market secure for profit. There are only few companies who control this part of
the market. Some of the few markets in oligopoly that I have purchased from and use in my daily
life is my, Verizon wireless phone and my Toyota, Corolla. I do think that Verizon wireless has
lousy customer service and I will be switching to another company when my contract is over.
 3
There are other firms that sell identical and differentiated products such as, T-Mobile and AT&T.
Oligopolies have barriers to entry this keeps other competitive firms at bay and makes it easier
for these big firms to make the profit. Automotive is part of the oligopoly industry because it is
dominated by few firms and consumer choice is limited (Biscontini) (Kramer).
Perfect competition and monopolistic competition are a like in that it is a free market to
entry. The only difference is that monopolistic competition can set higher prices and there
products are differentiated. When I choose my produce, I know that most of the prices will be the
same no matter what store I purchase them from. I have a few more choices when it comes to
picking where I want my next cup of coffee to come from and I know that the prices can range
from reasonable to ridiculous by which store and brand I choose.
Monopoly and oligopoly are market structures with barriers to entry. Monopolies do not
have many differentiated products to choose from making consumer choice limited. Oligopolies
have few firms in the market the firms have similar and differentiated products to choose from.
The monopoly that I am stuck with is Dominion Energy. It would be nice to have the option to
switch gas companies. The next time I purchase a vehicle I will remember that there are few
firms to choose from because the big firms drive out the smaller firms making the competition
limited.
 4
Bibliography
Biscontini, Tyler. “Oligopoly.” Salem Press Encyclopedia, 2018.
http://search.ebscohost.com.libprox1.slcc.edu:2048/login.aspx?direct=true&db=ers&AN
5383&site=eds-live.
Chirila, Adrian. “10 Companies You Probably Never Realized Had Monopolies.” Toptenz.net,
Toptenz.net, 6 Oct. 2015, www.toptenz.net/10-companies-never-realized-
monopolies.php.
“Definition of Monopoly | What Is Monopoly? Monopoly Meaning.” The Economic Times, 16
Apr. 2019, economictimes.indiatimes.com/definition/monopoly.
Kramer, Leslie. “What Are Current Examples of Oligopolies?” Investopedia, Investopedia, 12
Mar. 2019, www.investopedia.com/ask/answers/121514/what-are-some-current-
examples-oligopolies.asp.
Miller, Shari Parsons. “Market Structures.” Salem Press Encyclopedia, 2019. EBSCOhost,
search.ebscohost.com/login.aspx?direct=true&db=ers&AN=90558381&site=eds-live.
Schiller, Bradley R., and Karen Gebhardt. Essentials of Economics. 10th ed., McGraw-
Hill/Irwin, 2017.