Market Structure - Behavior of Firms

Name:
Institution:
Course:
Date:
Market Structures
Perfect Competition
Perfect competition is fundamentally a market structure that has multitudes of people in competition with each other. There is no individual firm that has the dominant influence in the entire market due to equal competition from other firms. In effect, the industry produces optimality in output for the firms and consumers because of the balance that competition creates.  An example of a company in perfect competition market structure is Coca Cola. Coca Cola operates in the soft drinks and beverages industry as a leading company for many years. However, it faces intense competition from many companies in the industry such as Pepsi. Coca Cola manufactures soft drinks that have the similar satisfaction that Pepsi soft drinks have. There are also other companies in the industry that increase the competition. Consumers can purchase non-Coca Cola products by preferring others retailing at the same prices and producing a similar or greater satisfaction for them.
Monopolistic Competition
It defines a market structure that has millions of firms that are in competition. These firms usually sell products that have a slight differentiation. It provides the ground for the establishment of market power because it allows them to charge expensive rates for the products or services. It builds on the primary assumption that all firms have a common goal of profit maximization. However, the difference that exists between perfect and monopolistic competition is that the former has many firms sell...