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Market Structure. Please refer to the table below that compares the market structures. Structure / task
Brief description
Example of a firm
Barriers to entry
Number of firms
Price elasticity of demand
Presence of economic profits
Trend
Government interference
Perfect competition
An ideal market structure characterized by a large number of small firms, identical products sold by all firms, freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology.
Agricultural producers of potato's, pork bellies, gold manufacturers and others who cannot dictate the price
Low barriers
In the USA there are several thousand large farms and several hundred thousand individual farmers
Food in general is always bought at any price, yet the competition does not allow the firms to dictate the price of chicken eggs or potato's.
The farmers in the USA are in a loss, and receive government subsidy. Profit is present but because of the competition is very diluted among sellers which makes it hard for sellers to survive without government support.
The number of farmers does not grow in the USA.
Government support and subsidy.
Monopoly
Monopoly, at the other extreme, represents the ultimate of inefficiency brought about by the total lack of competition. You can't have less competition than a single firm selling a good.
All nuclear plants are monopolies in their states
High start up costs, plus government permission to enter. For safety and environmental reasons, it is almost impossible to open a new nuclear power plant in the USA in the state that already has one plant.
Usually no more than 1 in each state
The US demand for electricity is extremely high. Demand is inelastic.
If the monopoly was not governmentally controlled it could make real big profits.
The US government does not allow any new nuclear plants.
Government either breaks apart monopolies or controls them fully.
Monopolistic competition
A market structure characterized by a large number of small firms, similar but not identical products sold by all firms, relative freedom of entry into and exit out of the industry, and extensive knowledge of prices and technology. Monopolistic competition approximates most of the characteristics of perfect competition, but falls short of reaching the ideal benchmark that is perfect competition. In fact, the best way to think of monopolistic competition is our imperfect real world's best approximation of perfect competition.
It aspires to perfect competition, but doesn't quite make it.
Internet service providers, Fast food restaurants (cafes)
Internet service providers (ISP) must register with various government agencies and only then provide their service. Food related companies must meet the proper legal Food and Drug Administration inspection and only then can operate.
In the USA there are over 200 internet service providers, As well as over 500 restaurants that have at least one franchise.
People always eat and now seem to always use the internet. Internet price falls down and is expected to be covered out of ad spending.
As for food there is not substitute for it, yet the perfect competition does not allow all firms keep the prices high.
Internet is extremely profitable nowadays. With over 80 % of Americans using the internet everyday, the profits potential for the ISP is high. Americans also eat out more than other nations, giving great profits to the eateries.
Number of firms is still growing
Government does not interfere.
In conclusion It should be noted that technology can drastically change the market structures. For instance, the advent of sophisticated technology in car manufacturing can lower the entry barriers (startup costs) and involve new car manufacturers. The new technology can be patented and the new-comer to the car industry would be able to enjoy some benefits of just entering the oligopolistic market. Innovation is certainly another aspect that needs to be taken into account. Should innovation occur in medicine, the company is free to patent the innovation and then would derive benefits from selling it over several years.
As a result, there will be money for the market entry. The same can be applied to the monopoly as well. If someone finds out the ways as to how cheaply make obtain hydrogen and oxygen from water, he would be able not only to open an environmentally friendly powerplant that will certainly compete with the existing monopolies, but will also allow the inventor to enter other industries like hydrogen-powered car manufacturing.
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Research essay sample on Internet Service Providers Monopolistic Competition
