Different Types of Market Structure

Econ 210 – Market Structures
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April 23, 2021
Understanding the differences between the various types of markets is essential for any business manager or executive. It allows him to better understand how to leverage the type of organizational structure to achieve positive growth over the long run. Accordingly, the four types of market structures are (1) monopolistic competition, (2) pure competition, (3) oligopoly, and (4) pure monopoly. While each of these four has its own advantages and disadvantages, one of the most notable differences is its effects in both the short- and long run. In this article, the author hopes to differentiate between each of these four and analyze them based on their relative differences.
The first type of market structure is a pure monopoly. This market is usually characterized by having a large consumer base and few dominant sellers. Due to the lack of the number of sellers that offer the same product, the seller is mostly free to dictate the price level and the output level that is offered to the market. At times, such price levels may also differ (or discriminate) between different buyers. In the short run, firms in monopolistic competitions have their marginal revenues equal to their marginal costs. Since they lack significant competitors, they are less likely to take a loss and more likely to make supernormal profits. Accordingly, different factors may affect their consistent profit increase in the long run, such as variable production.
The second type of market structure is perfect or pure competition. Perfect competition usually exists in industries with l...