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Market Structures: Perfect Competition Vs Monopoly

831 Words4 Pages

The Tapese people are being exposed to two different types of market structures - perfect competition and a monopoly. The transition from a perfect competition market to a monopoly market can have a significant change for the people of Tap. Before, the competition of Corn between sellers was very tight and competitive. Because the competition was high, it caused the prices of corn to be low. When the Mega Company combined all the corn sellers together, the prices began to rise. Therefore, with all the corn sellers together, only one company was selling corn (Mega Company). There were no competitors because Mega Company was the only company that would sell corn to the Tapese people, resulting in a monopoly.
The market structure of the island …show more content…

Monopoly market structures are where there is only one firm who is the price maker, there are higher prices, no competitors exist, and there are substantial barriers to enter. Because Mega Company has all the power over selling corn, this results in Mega Company becoming the only price maker. Mega Company can set the price higher in the monopoly market structure than when corn was selling in a competitive market because there are no opportunities for a new company to enter the market. No matter what, Mega Company will always win because there is not a close competitor and their profits will always increase because they will always have customers.
Another example of a monopoly market structure is the oil industry. For oil, OPEC is the only major company that has all the power for selling and managing the prices of oil. Small car shops and gas stations all get their oil in some way from OPEC. If these shops and stations do not pay for what OPEC is asking, then they will not receive oil and run out of business. All the gas stations and small car shops that do oil changes, do not have a choice other than to buy oil from OPEC for whatever price they ask

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