Options under number of firms are (one, many, or few) options under type of prod

Question

Options under number of firms are (one, many, or few)

options under type of product is (anything, standarized,differentiated,unique)

options under entry (impossible,challenging,easy)

options under market model (price-searcher,price-taker,oligoploy,monolopy)

2. Market structures For each scenario in the following table, determine which market model best describes the scenario. Then identify the number of firms, the type of product, and the ease with which new firms can enter the market under this market structure. Number of Firms Scenario Many small shops sell different styles of sweaters. Some stores sell higher-quality and more expensive sweaters than other stores. Dozens of companies produce plain white socks. The standard technology for producing socks is widely known and available to anyone who wants to start the business Four Internet providers offer similar services to almost everyone in the city. Any new company would have to engage in a price war with the existing companies. Only one pharmaceutical company has a government patent to sell an experimental drug. Type of Product Entry Market Model

Explanation / Answer

Answer : 2) a) Number of firms : Many ; Type of product : Differentiated ; Entry : Easy ; Market model : Price - searcher .

In price - searcher market firms can easily enter and have the right to sell differentiated products at different prices. As a result, many firms enter into the market.Therefore, the given scanirio is an example of price - searcher competitive market structure as firms produces differentiated products and sells at different prices.

b) Number of firms : Many ; Type of product : Standarized ; Entry : Easy ; Market model : Price - taker .

In price - taker market firms can easily enter. As a result, many firms enter into the market sell standarized product at given price level. In the given scanario all firms uses a standar technology to produce shocks which means that all firms produces standarized product. The scanario also says that any firm can produce this standarized product at any time if they want which means that there is no barrier on entry. These all are the characteristics of price - taker market structure. Therefore, the given scanario is an example of price-taker competitive market structure.

c) Number of firms : Few ; Type of product : Standerized ; Entry : Challenging ; Market model : Oligopoly .

In oligopoly market firms sell either differentiated products or stnderized products. In the given scanario all four internet providers gives similar servies which means that here all are selling standarized product. Here only four internet providers exists in the market and new company can also enter into the market which are the characteristics of oligopoly market structure. Therefore, the given scanario is an example of oligopoly market structure.

d) Number of firms : One ; Type of product : Unique ; Entry : Impossible ; Market model : Monopoly .

In monopoly market structure only one firm sell an unique product. In the given scanario only one company sells an experimental drug because only this company is permitted by the government to sell this drug. Hence there is no chance to enter any other firm into the market. Therefore, the given scanario is an example of monopoly market structure.

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