Question 3:

Compare and contrast fully the Two Market Structures (types of business firms)covered in the Text below.

9-6e THE FOUR MAJOR MARKET STRUCTURES REVISITED You might legitimately ask the question: If perfectly competitive and monopolistic firms are rare and monopolistically competitive and oligopoly firms are common, why did we study the former first? What we learned from the perfectly competitive model about costs, entry, exit, and efficiency are still important concepts for imperfectly competitive firms. In addi- tion, the applications of oligopoly and monopolistic competition theory are still somewhat controversial tit-for-tat strategy used among economists-so we in repeated games, the strategy started with what we know in which one player follows best. Exhibit 9.12 provides the other player's move in the previous round; leads to greater an overview of the various cooperation types of market structures.Exhibit 9.12 Characteristics of the Four Major Market Structures Characteristic Perfect Competition Monopoly Monopolistic Competition Oligopoly Number of firms Very many One Many A few Firm role in determining No role; price taker Major role; Some role Some role price price maker Long-run economic No Yes No Yes profits possible Barriers to entry or exit No substantial ones Extremely great Minor barriers Considerable barriers from industry Type of product Homogeneous Homogeneous Differentiated Homogeneous or differentiated Key characteristic Firms are price takers Only one firm Product differentiation Mutual interdependence