Applied Economics

Quarter 3 – WEEK 5:
Various Market
Structures
 IN THIS MODULE, YOU WILL BE ABLE TO
KNOW THE FOLLOWING:

Lesson 1: Market Structures

Lesson 2: Monopoly
Lesson 3: Monopolistic Competition
Lesson 4: Perfect Competition
Lesson 5: Oligopoly
 LETS SING

Tune: Twinkle, Twinkle, Little Star

Market structures, what are those?
Send me help ‘coz I don’t know.
Is it needed for me to learn?
If that was the case then start the lesson.
 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 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.
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.
Moreover, these are the most notable characteristics of market structures:

• 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, whereupon, there are few sellers of a standardized or a
differentiated product.
___ 1. These are the key points in evaluating business’ economic environments.

___ 2. What do you call the type of market structure in which there is a single
merchant of a product for which there is no close alternative?

___ 3. It is one of the social relations wherein people exchange goods and services. ___ 4.

Market structures deal with strategic decision making and focus on what?

___ 5. It is a type of market structure wherein a similar product has many sellers.
 ___ 6. Who are the people concerned about market structures because they have different
approaches in this said matter?

___ 7. What do you call the type of market structure in which differentiated product has
many vendors?

___ 8. Who can precisely judge industry, policy changes, and market news?

___ 9. What provides the existence of different market structures?

___ 10. It is a type of market structure wherein there are few sellers of a standardized or a
differentiated product.
 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
 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.
• 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.
 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.
 PERFECT COMPETITION
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
 OLIGOPOLY
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,bpatents, 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 changes and decreases its price, it will
significantly affect the other firms.
• Rampant advertising since most companies use national media to promotetheir products
 What is It

What’s More

Directions: Identify whether the example companies are oligopolies or not. Write YES if it is and NO
if not.
1. Automobile industry
2. Bubble tea shop
3. Snack house
4. Mass media company
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
______12. Airlines
______13. Sari-sari store
______14. Network providers
______15. Aircraft manufacturing industry

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 Assessment

Directions: Read each question carefully. Encircle the letter of the correct answer.
1. Can different firms be 5. Do monopolies
cause deadweight
interdependent with each other? loss in the economy?

a. Yes, what a single firm does can a. Yes, because they are illegal
significantly affect the firms. businesses.
b. No, they have b. Yes, because they are not price
their own setters.
businesses. c. Yes, because they can minimize their
c. No, that’s not allowed. output production to put higher prices
d. Yes, but that is illegal. and gain more profit.
d. No, because they uplift the
2. It deals with strategic decision making and
economy.
focuses on both economics and marketing,
making professional entrepreneurs precisely 6. In a monopolistic competition, can every
judge industry, policy changes, and market firm set the price?
news. a. Yes, because their products are
a. market different in their own way.
b. market structures b. No, because that is not allowed.
c. business c. No, because no one will buy if
d. economy they increased the price.
d. Yes, but that is illegal.
3. It is one of the numerous 7. Is there a type of market structure wherein
infrastructures, systems, institutions, social the market has full control over implying
relations, and prices?
procedures, a. Yes, but that is only if there are uniform
wherein buyers and sellers usually interact
prices that depend on the demand and
with each other to exchange goods and
supply.
services. b. No, the market doesn’t have the
a. market power to do that.
b. economy c. No, different companies will
c. business protest if that happened.
d. malls d. Yes, but that is illegal.
8. Are the participants in oligopolies price
4. It usually emerges because there is a high
setters or takers?
barrier to enter and exit in a particular market.
a. They are price setters.
a. business
b. They are price takers.
b. market
c. They are both.
c. monopoly
d. None of the above.
d. economy

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9. What do you call the market structure for that.
structure where many products are similar b. No, companies won’t agree with
that may substitute each other since they have producing identical products and not
the same features, price and, quality? branding it.
c. No, that is not allowed.
a. market
d. Yes, but they cannot sell it.
b. perfect competition
c. monopolistic competition 13. In a monopolistic competition, can
d. trade consumers prefer one product over another?

10. It pertains to the situation where several a. Yes, it’s their right.
companies sell the same yet slightly different b. No, that’s not allowed.
products. c. No, their preference does not
matter.
a. monopoly
d. Yes, but they are not allowed to
b. trade
buy it.
c. monopolistic competition
d. market

11. Which of the following are the types of

market structures?

I. Monopoly
II. Business
III. Oligopoly 14. It is a type of market structure where firms
dominate the market by
supplying either similar or
IV. Economy
differentiated products.
V. Market
a. similar market
VI. Monopolistic Competition b. monopoly
VII. Perfect Competition c. oligopoly
d. differentiated market

a. I, II,
III, VII 15. Are monopolists price setters?
b. I, III, VI, VII
a. Yes, because they are the only producer
c. II, III, V, VI
of the product they sell.
d. All of the above. b. Yes, because they are NOT the only
producer of the product they sell.

12. Can companies manufacture identical c. No, because the government

products that are not branded? doesn’t allow them.
d. No, because that is illegal.
a. Yes, there is a specific market

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