Theoretically speaking four different market structures exists in today's world. Monopoly, oligopoly, imperfect competition and perfect competition are those four market structures. Monopoly and perfect competition are the two extreme cases, in monopoly the market is governed by one seller, and under perfect competition there are so many sellers that none of them has any power to control the market. As these two market structures are so extreme in nature, examples of these markets are very difficult to find in the every day world. Oligopoly and imperfect competition are the two common market structures and examples for them are easy to find in the real world. Oligopoly market structures usually consists of a very few firms in a given market and thus these firms enjoy quite a strong control over the market; example of an oligopoly would be OPEC.
perfect competition
Perfect fit
65 - Perfect RecallThe perfectly competitive model relies on five basic assumptions. These assumptions stay the same regardless the fact whether the market under consideration is a product market or a factor market. The first four have to do with the supply side and the fifth assumption is concerned with the demand side. As outlined below the first assumption states that all firms in perfect competition are price taking firms.
What is a price-taking firm? A firm is both a supplier and a demander; it is a supplier of the good it produces and a demander of the capital equipment that is required to start up in this industry. A price taking firm has two characteristics, one that no matter how much output it alters the firm cannot change the prevailing market price on that commodity, second that no matter how much capital equipment they demand it will be supplied to them at a fixed market prevailing price. The firms under perfect-competition...