Company under Different Market Structures Assignment

Company under Different Market Structures - Assignment Example There are no barriers to entry for other firms to enter into the market. In the short run, the firms can change only the variable factor namely labor. The other decisions are predetermined (KrÄ Ãƒ ­lkovà ¡, n.d., p. 3). In the long run, the firms have the potential to change their scale. In the short run when the existing price is less than the average cost curve it is better for the firm to close down. In a situation of monopoly single firm exists in the market. The firm sells a unique product and there are no close substitutes. The firm has the power to set the price i.e. the firm is the price maker. Barriers to entry exist in the market of monopoly. There are many buyers and sellers in the monopolistically competitive market. The products of the market can be differentiated. Monopolistic competition along with oligopoly constitutes the structure of imperfect competition. Firms that are imperfectly competitive offer many products. The products are offered at administered prices. The price changes are costly and slow. The prime prediction of the theory of monopolistic competition is that firms will produce at the level where marginal cost equals marginal revenue in the short run. However, in the long run, the firms will operate at zero profit levels and the demand curve will be tangential to the average total cost curve (Solow, 1999, p. 9). A form of market where the industry is dominated by a small number of sellers is called oligopoly. Each oligopolist is aware of the market conditions as few sellers are present in the market. The decision of one firm can influence or are influenced by other firms. The responses of the participants of the market are taken into account in the strategic planning process by the oligopolists (Friedman, 1983, p. 6). Competition in the oligopolistic market can give rise to different outcomes. An oligopoly can maximize its profits by producing at the level where marginal revenue equals marginal costs.