Chapter 9, Problem 13AA

To determine

To state: Three types of market structures with imperfect competition.

Answer to Problem 13AA

Oligopoly, Monopoly and Monopolistic Competition are the three types of market structures with imperfect competition.

Explanation of Solution

Oligopoly refers to the market structure in which there are few sellers and thus all of them exercise a significant influence in the market. It is a form of imperfect competition. Interdependence is an important aspect in an oligopoly market. If any of the selling firms make a slight change in their product prices, it will directly hamper their rivals and they, in return, would change their prices too to sustain the market.

Monopoly is a type of market structure where there is only one seller of a particular product or service and he controls the sale of the product and service. Since there is only one seller, so he enjoys the power to determine the prices of the products or services sold by them.

There are no substitutes for the goods and services and limitations are there on the entry of new firms in the market, therefore, the sellers hold a great control over the market supply and thereby control the price determination.

Monopolistic competition, another type of imperfect competition, is a market structure that contains both the aspects of oligopoly and perfect competitive markets. In a monopolistic competition, there are no entry and exit limitations for the firms just as in perfect competitive market but the products are differentiated as in oligopoly. Product differentiation provides enough choices for the buyers to choose from one.

Economics Concept Introduction

Introduction: Imperfect competition refers to the market structure in which sellers sell differentiated products. Al the firms in the market sell heterogeneous products and no two firms engage in selling homogeneous products.