Differentiate Various

Market Structures
 Market Structures
• A market is one of the numerous infrastructures, systems, institutions, social
relations, and procedures, wherein buyers and sellers usually interact with each
other to exchange goods and services. In relation to that, this lesson will enlighten
you of the different market structures that distinguish an economy.
Market Structures
• Market structures are the key points in evaluating business’
economic environments.
• It deals with strategic decision making and focuses on both
economics and marketing, making professional entrepreneurs
precisely judge industry, policy changes, and market news.
• The significant operational definition of market structure is a
concern to both economists and marketers since they have
different methodological approaches in this, and each of them has
their strengths and weaknesses .
 Market Structures
• Moreover, these are the most notable characteristics of market structures:
• The relationship between a seller to another seller, a seller to his/her buyer, and many more.
• The product that has been sold and the extent of product differentiation, which affects cross-price elasticity of
demand.
• The number of companies or corporations, including the scale and range of international competition, in the
market.
• The concerns in entering and exiting the market.
• The dissemination of market shares for the largest firms.
• The number of buyers and how they behave to mandate a product’s price and quantity.
• The turnover of customers which can be affected by the extent of consumer or brand loyalty and the influence
of persuasive advertising and marketing
 The interactions and variations in these aspects provided the
existence of different market structures, which are the
following:

• Monopoly. Herein, there is a single merchant of a product for which there is no close alternative.
• Monopolistic Competition in which differentiated product has many vendors.
• Perfect Competition, wherein, a similar product has many sellers.
• Oligopoly, where upon, there are few sellers of a standardized or a differentiated product.
• These market structures will further be discussed in the subsequent lessons.
Directions: Identify at least 5 characteristics of market structures
you observe every time you go to the marketplace. (3 points
each)
• 1
• 2
• 3
• 4

• 5
Monopoly
• A monopoly pertains to a situation wherein there is only a
single company that produces a certain product in the entire
market.
• Because of that, they have the power or the authority to
manipulate their products, such as minimizing their outputs to
put higher prices in it and to gain more profit.
• In
this situation, consumers have a lesser benefit, especially
when the product is essential to them, making them buy it
despite being expensive.
Example of Monopoly
• The Meralco Electric Company is a perfect example of monopoly in the Philippines The
petroleum and the telecommunications markets, the automobile industry, and the bank
system are some examples of oligopoly.
Monopolies commonly emerge because there is a high barrier to entry and exit in a
particular market. The three main factors that can become the reason for it are the
following.
• Ownership of a fundamental resource - If the key resource is solely owned by a firm,
the firm can limit the access to this source, therefore creating a monopoly.
• Economies of scale – In some sectors, a single firm can sustain products or goods at a
lower price than two or more firms could, resulting in a natural monopoly, which arises
even without the intervention of the government.
• Government Regulation – To suffice the interest of the public, the government usually
restricts market entries in a legal way, which is through copyright laws and patents.

Frankly said, monopolies are usually unwelcomed to society because it can cause
deadweight loss by producing lesser outputs than the competitive ones, yet still, have
higher prices. However, the government can react to these by demanding price
regulations, establishing competition laws, nationalizing the monopolies, or by not doing
anything at all.
Directions: Read each question carefully and write TRUE or FALSE on the space provided before each number.

______ 1. In a monopoly, many companies sell the same product.

______ 2. The government’s action can cause monopolies to emerge.
______ 3. The consumers benefit more in buying monopolized products.
______ 4. You are not allowed to buy a monopolized product.
______ 5. The entry and exit are blocked in monopoly.
______ 6. The firm’s ownership of a fundamental source can cause a monopoly.
______ 7. There are substitutes or alternatives to monopolized products.
______ 8. A natural monopoly can arise even without the government’s
intervention.
______ 9. Monopolies are usually welcomed to society.
______ 10. Monopolies can cause a deadweight loss to the economy.
______ 11. The government can demand price regulations for monopolies.
______ 12. Monopolies are illegal businesses.
______ 13. Competitive markets produce lesser outputs than monopolies.
______ 14. The government cannot nationalize monopolies.
______ 15. The monopolist can set the product’s price.
• Directions: State if the given situation is a MONOPOLY or NOT. (3 points each)
• _____________ 1. Barbara went to the market yesterday to look for a cosmetic product.
She bought 5 pieces of it and they all have different brands.
• _____________ 2. Your mom asked you to buy a Brand A Pancit Canton in Aling
Nena’s Store. Sadly, they ran out of it so you just bought Brand X Pancit Canton.
• _____________ 3. Achilles owns the only Art Shop in their town that’s why he raised
each material’s price and limited the products they make.
• _____________ 4. Jason went to the mall last week to purchase a gift for Clara. He then
noticed that there was a newly opened accessory shop and bought a necklace for her
despite being too expensive.
• _____________ 5. Your friend opened a cake shop. He then asked you to come and buy
some. You can’t complain so you ended up buying one. Unexpectedly, it tasted good.
When you came back there the following week, the cake you bought last time was
already unavailable
Monopolistic Competition
• Isabela went to the grocery store earlier along with her 7-year-old daughter named
Chelsea. When they arrived at the powdered milk’s corner, she asked her daughter.
• Isabela: Baby, what milk do you want? Milk A or Milk B?
• A question then popped out of Chelsea’s mind, making her answer her mother with
another question.
• Chelsea: Mom, why do I need to choose? Both are the same kind anyway. Why do we
have different brands?
• When there is a numerous quantity of small firms competing
against each other, it is called a Monopolistic Competition.
• However, in this type of market structure, several companies sell
the same product but they have their differences.
• Those differences give them market power which lets them
charge higher prices for a product, but is within a certain range.
• These key factors can include style, brand name, location,
packaging, advertisement, and pricing strategies, which became
every firm’s basis in marketing.
• You can assume the following when discussing the monopolistic competition:
• Every firm is a price setter and can maximize their profit
• They sell similar yet slightly different products.
• The consumers can favor a product more than the other one.
• There are easy entrances and exit in this market.

This type of market structure can be observed in reality. Some of the common examples
are:
 Cap’n Crunch, Lucky Charms, Froot Loops, and Apple Jacks, which are all companies
that sell breakfast cereals with small differences.
 McDonald and Burger King, which both sell slightly different burgers
 Nike and Adidas, which both sell running shoes, but are different in some ways.
Directions: Read each question carefully. Fill in the
blanks and choose the correct answer from the box.
• (1) A _______________ is a type of market structure wherein
there is a numerous quantity of small firms competing against
each other. In this market structure, several companies can sell (2)
_____________ yet (3) _____________ products. Moreover, any
firm can set the (4) __________, but only with a certain range.
They can also maximize their own (5) _____________. The (6)
_____________ in their products can be in style, brand name,
location, packaging, advertisement, and pricing strategies, which
became every firm’s (7) _____________ in marketing. There is
also an easy (8) _____________ and (9) _____________ in this
market. On the other hand, the consumers can (10)
_____________ a certain product over the other one.
Perfect Competition
• Visualize yourself as a seller of bubble tea in a food court. Your
bubble tea includes tapioca pearl, cream cheese, and cookies. In
the same food court, two other bubble tea stalls are offering the
same product as yours. Among you and the other sellers, no one
can change the price of the product since everyone is aware that it
costs 85 pesos each large bubble tea. Once you have increased the
price of your product, the consumers may tend to buy on other
stalls since they are also selling the same item at a cheaper price.
In this situation, it shows a perfect competition market structure.
• Perfect competition is a type of market structure where many products are similar and
may substitute each other since they have the same features, price and, quality.
• There are many sellers and consumers in this type of market with almost the same
products.
• Moreover, a perfectly competitive market requires few barriers to enter and it is easy
for producers to quit whenever they want.
• They also have uniform prices that depend on the demand and supply which means that
the market has full control over implying prices.
 Perfectly competitive markets show these
characteristics:
• Both the producers and consumers have perfect knowledge without information failures. The
details and information in this market are easily accessible to all participants. Thus, risk-taking
is not necessarily important and the power of an entrepreneur is limited.
• Producers and consumers are making coherent decisions for their benefit. For instance,
producers make decisions to maximize their profits, and consumers make decisions to
maximize their utility.
• There are no hindrances to enter nor exit from this type of market.
• Companies manufacture identical products that are not branded.
• Producers don’t have the power to influence the market price nor the condition.
Directions: Determine whether the following characteristics are describing a perfectly competitive market.
Write YES if it describes it, while NO if it does not.

1. There are no barriers to entering a perfectly competitive market.

2. There are no barriers to exiting a perfectly competitive market.
3. Entrepreneurs have control over implying prices.
4. The products are almost similar to each other.
5. It is easy to enter this market.
6. All information is accessible to all.
7. Neither the producers nor consumers have perfect knowledge.
8. Producers make decisions for the benefit of the consumers.
9. Producers make decisions to maximize their profits.
10. Consumers make decisions to minimize their utility.
11. Sellers can easily increase the price of their products.
12. Entrepreneurs have uniform prices for their products.
13. Companies produce different branded products.
14. Taking risks in this market is important.
15. The power of producers is unlimited
Oligopoly
• Imagine yourself starting to build an automobile business.
• Since you are just a beginner, you will set your price lower than your competitors. In
this way, you can attract more customers as they may notice the difference in price.
• Once you already have more customers compared to other companies, they would be
forced to lower their prices for them to gain more clients and sales. This situation shows
an oligopoly market structure.
• An oligopoly is a type of market structure where firms dominate the market by
supplying either similar or differentiated products.
• There are only a few companies in this structure and they have control over price
implying.
• It is also difficult to enter this market since there are a lot of barriers.
• Moreover, participants in oligopolies are price setters rather than takers. Some examples
of oligopoly companies are the automobile industry, the steel industry, aircraft
manufacturing industry, etc.
• Oligopoly markets show these characteristics:
• Entrepreneurs maximize profits.
• Oligopolies set prices rather than take price.
• There are a lot of barriers. It includes government licenses, economies of scale, patents,
and access to expensive and complex technology. Also, some government policies are
favoring the current companies in the industry so it is hard to enter for beginners.
• Interdependent. Like for example, if one firm change and decreases its price, it will
significantly affect the other firms.
• Rampant advertising since most companies use national media to promote their
products.
• Directions: Identify whether the example companies are oligopolies or not. Write YES if it is and NO if not.
• 1. Automobile industry ______12. Airlines
• 2. Bubble tea shop ______13. Sari-sari store
• 3. Snack house ______14. Network providers
• 4. Mass media company ______15. Aircraft manufacturing industry
• 5. Oil and gas industry
• 6. Cellular phones company
• 7. Taco stall
• 8. Pharmaceuticals company
• 9. Poultry shop
• 10. Aluminum and steel company
• 11. Computer company
What I Can Do
Directions: Read the situations carefully. Tell whether it is an example
of oligopoly market or not. Put a check on the column of your answer.
Assessment
Additional Activities
• Directions: Match the corresponding definition or characteristics to the market
structures. Write the letter of the appropriate answer from the box below.
• A. Monopoly C. Perfect Competition
• B. Monopolistic Competition D. Oligopoly
• 1. Composed of few companies.
• 2. Type of imperfect competition.
• 3. Products don’t have close alternatives.
• 4. Producers cannot influence the price in the market.
• 5. Products can substitute each other.
• 6. Merchants have the power or the authority to manipulate their products.
• 7. Entrepreneurs are price setters but within a certain range.
• 8. Entrepreneurs are price takers.
• 9. Products are differentiated but not perfect substitutes.
• 10. The firms are interdependent with each other.
• 11. Information are easily accessible.
• 12. Products are almost similar.
• 13. Contains a single firm.
• 14. It is usually unwelcomed to society.
• 15. Most companies use national media for advertisements.