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# Differentiating between Market Structures Simulation

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Economics, Cost-Benefit Analysis - Year 4

Differentiating between Market Structures Simulation

Prepare a table that compares and contrasts the various characteristics of the four market structures. Format the table as follows:
a. Column headings should be the four market structures:
1) Perfect competition
2) Monopoly
3) Monopolistic competition
4) Oligopoly
b. Use the following Row headings to help explain the basis for your market characterization:
1) An example of a organization
2) Goods or services produced by the organization
3) Barriers to entry
4) Numbers of organizations
5) Price elasticity of demand
6) Economic profits (Is there a presence of economic profits? Yes or no.)

Based on your learning and the simulation, prepare a 1000-1400 word paper summarizing the content of the simulation. Address the following questions:

1) What are the advantages and limitations of supply and demand identified in the simulation?
2) Select an organization with which you are familiar. Identify the market structure of your selected organization. Evaluate the effectiveness of this structure for the organization.
3) Analyze how organizations in each market structure maximize profits.

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1) What are the advantages and limitations of supply and demand identified in the simulation?
In the first part of the simulation where the Consumer Goods Division operates in a perfectly competitive market, the advantage to the supplier is that they can sell whatever they produce. However, their limitation is that they have to accept the price that is offered to them. The demand curve is perfectly elastic. The disadvantage to the supplier is that if it charges even a cent more, it will not be able to sell anything. Similarly in case of demand, the buyer may purchase whatever quantity he wants at the price given to him. If he attempts to pay a cent lower than the price, he will not be able to make the purchases.
The advantage of demand and supply in case of the Coal Division or monopoly is that the seller should focus on his marginal costs. The Coal Division is a monopoly and the company should set its output and price at the point where marginal costs equal marginal revenues. In other words the marginal cost must equal marginal revenue. However, because the marginal revenue is less than price in case of monopoly, The cost curve has to be extended to the demand curve to find the right price to charge. The next situation is that of duopoly, a special case of oligopoly. In this case the uses of demand are limited. If a seller reduces his price the entire demand shifts to him. However, there will be retaliation from the other party and it will lower prices below yours. In such a situation, some sort of understanding is required so that both the companies gain economic profit. This is the situation for Far & Wide Transport and the Chemicals division. It is difficult to guess the behavior of the other party. The demand ...

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• BSc , University of Calcutta
• MBA, Eastern Institute for Integrated Learning in Management
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