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There are four distinct markets structures in the American economy. These four markets are, pure competition, pure monopoly, monopolistic competition, and oligopoly. These four market models differ as to the number of firms in the industry, whether those firms produce standardized products, or try to differentiate their products from those of other firms, and how easy or difficult it is for firms to enter the industry.

First, pure competition market involves a very large number of firms producing a product. In this kind of market new firms can enter the industry very easily. There is non-price competition and no price control. Although pure competition is rare in practice, it is the standard against which the efficiency of the economy and other markets models can be compared. The demand schedule faced by the individual firm is a pure competitive firm is perfectly elastic. In the long run, pure competition produces almost conditions for economic efficiency. In addition, pure competition produces products in the least costly way, and thus it is productively efficient. Pure competition also allocates resources firms, so that they produce the products most wanted by society. Pure competition provides consumers with the larg

Third, monopolistic competition involves a relatively large number of sellers, so each firm has a comparatively small percentage of the total market, so each firm has a limited control over market price. Also, entry into the industry or exit from it is easy. Monopolistic competitive firms also use non-price competition in the form of product differentiation and advertising. Monopolistic competitive firms are found throughout the economy. Some examples are grocery stores, gasoline stations and restaurants. Monopolistic competition suggests a considerable amount of competition mixed with small monopoly power. Some examples of monopolistic markets are fast foods places, such as Mc Donald's, Subway, or Taco Bell.

Finally, oligopoly is a market composed of a few firms that dominate an industry and sell a standardized or differentiated product. Because of the few firms that exist in the United States, oligopolies have considerable control over their prices, but each must consider the possible reaction of rival to its own pricing, output, and advertising decisions. Oligopoly often leads to overt or covert collusion among the firms to fix prices or to coordinate pricing because competition among oligopolies result in low price

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Approximate Word count = 832
Approximate Pages = 3 (250 words per page double spaced)

Category: Miscellaneous

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