MGE1108 ECONOMICS FOR BUSINESS

Question 1

The number of firms in the market

Perfect competition and monopolistic competition have a huge number of firms in the market so much so that a single firm does not have control over the market price. The number of sellers in the market structure of oligopoly is more than three. However, the number of sellers is such that it can be counted. In the case of monopoly, there exists only one firm that controls and serves the entire market (Smith, 2016).

The similarity to the products sold

Perfect competition sells products which are exactly equal to other sellers of the market but in case of monopolistic competition, the products of each of the sellers are slightly differentiated from the other sellers. A pure oligopoly which generally does not exist in the real life produces exactly similar products, on the other hand, impure oligopolies produces products which are slightly different from the other sellers. Monopoly is a single seller market and hence there is no question of similarity with the other sellers of the market.

Barriers to entry

Barriers to entry are most significant in case of monopoly where new players are not allowed to enter either by the force of the monopolist or by the assistance from the side of the government. In comparison, due to the fact that individual firms in perfect competition and monopolistic competition do not have huge power, they cannot restrict the entry or exits of other firms of the market. The barriers to entry are more in oligopoly compared to the perfect competition but less than that of monopoly. 

Question 2

Barriers to entry

The barriers to entry are the obstacle which is faced by a new firm that tries to enter a market (Olsen, 2017). There is a different source of barriers to entry that differently impacts on the operation of the company.  While government regulation makes the production process illegal, high cost such as that of monopoly makes the entry unprofitable.  Apart from that, economies of scale or the product differentiation also restricts the new company to enter a market and hence considered a barrier to entry.

Question 3

Nonprice competition is a business strategy wherein firms in the market upgrades the features of their products in order to increase the relative value of their product. Monopolistic competition and oligopoly experience nonprice competition the most due to product differentiation that exists in this market (Komlos, 2016).

Question 4

Coles Supermarket in your city – Monopolistic Competition as their product is differentiated from the other huge number of supermarkets.

McDonalds Restaurant in your city- Oligopoly as there is few of the big companies, the action of which impacts on the other. 

Metro Trains in Melbourne or Sydney Trains in Sydney- Monopoly, as the government restricts the new entry in this case.

National Australia Bank- Oligopoly, as this is one of few big financial institutes of the country.

Academies Australasia Polytechnic- Monopoly, as it is the only company under a government that provides polytechnic educations.

A small stall in one of Melbourne/Sydney’s Sunday markets that sells souvenirs such as wallets, caps, tee-shirts, key chains- Perfect Competition as, the size is small and among a huge number of sellers.

A car workshop or hair salon in your city- Perfect Competition, as there are a huge number of other salons and workshop that provides similar services.

iPhone and Samsung in the mobile phone industry- Oligopoly, as these are the two of the biggest players in the smartphone industry.  

Question 5