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How to Categorize Companies into Market Structures

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1. (20 points) In the following list is a number of well-known companies and the product that they sell. Which of the four types of markets (perfect competition, monopoly, monopolistic competition, oligopoly) best characterizes the markets in which they compete? Explain why. Hint: You may wish to distinguish between national and local/regional markets for some firms.
a. McDonald's - hamburgers
b. Exxon-Mobil - gasoline
c. Dell - personal computers
d. Heinz - ketchup
e. Proctor & Gamble - disposable diapers
f. Starbucks - gourmet coffee
g. Domino's - pizza
h. Intel - computer chips for PC's

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Solution Preview

The basic characteristics of pure (perfect) competition, monopoly, monopolistic competition, and oligopoly market structures are as follows:

In pure competition, there are a large number of firms competing for sales on the same or very similar products. The products are standard and not differentiated. In this market companies are price takers in that they do not have a lot of leeway in changing the prices of the products but have to adjust their efforts to ...

Solution Summary

This solution helps students classify/categorize companies into their relevant market structures.

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Market Structure

Discuss how the development of the Internet has changed the market structure in which companies operate. Remember that, we are assuming most firms can be categorized as being in perfect competition, monopolistic competition, oligopoly, or monopoly. Keep in mind, however, that perfect competition exists mostly as an ideal or benchmark, i.e. it is rarely if ever seen in the 'real world.'

Remember to use the criteria by which we categorize firms, e.g. the number of firms in a market, degree of competition, amount of market information available to both sellers and buyers, etc.

Lastly, see if you can use our managerial economic material to measure the impact of the Internet on market structure.

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