Differentiating_Between_Market_Structures

Market structure describes the state of a market and its competition or lack of competition. A market system is a process that brings buyers and sellers together to buy and sell goods and provide services. The markets are generally grouped in structures known as a monopoly, oligopoly, monopolistic, and pure competition. Webster’s Dictionary describes competition as “the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.” The types of goods sold, produced, and offered in our market are natural monopoly, private, public, and common resources. By comparing and contrasting these goods, we have to ask how they are alike and how they are different and what causes the public to make their decision. Seller entry barriers, excludability and rivalry in consumption, and how supply and demand affects market equilibrium are some of the factors that predetermine how these goods are marketed and sold and whether they are successful or unsuccessful. Public Goods, Private Goods, Common Resources, and Natural Monopolies An example of a private good is food that you consume, clothing that you wear, and tolls collected for roads that are congested. These goods are all excludable meaning people can be prevented from using them. The goods also compete in consumption in that one person’s use of the good will diminishes another’s use of the good. An example of a public good would be a tsunami warning, our armed forces, and an uncongested monorail system. These goods are not excludable and the do not rival in consumption. Common resources would include fish in the ocean or rivers, the air and water, and non-toll roads that are congested. The resources are rival in consumption but not excludable. Anyone can fish, but each fish caught leaves one less fish for another person to catch. A natural monopoly is excludable but not rival in consumption. An example of this service is the fire department. They can choose to let a structure burn, yet nobody else is equipped to put out a structure fire. References Mankiw, N.G. (2007). Principles of economics (4th ed.). Mason, OH. Cenagage Learning. Circular flow of economic activity. (2008). In Everyday Finance: Economics, Personal Money Management, and Entrepreneurship. Detroit, MI: Gale. http://www.merriam-webster.com/dictionary/competition http://tutor2u.net/economics/content/topics/monopoly/barriers to entry.htm