Describe the various market structures.

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pohnpei397 eNotes educator| Certified Educator

The four market structures can be easily described by comparing them on three different variables.

First, there is the number of sellers in the market.  In perfect competition there is a large number of sellers, in monopoly there is only one.  In between those extremes, in monopolistic competition there are many, in oligopoly there are few.

Second, there is the type of product being sold.  In perfect competition, it is homogeneous with no differences, real or perceived, between various competitors' products (like with wheat sold by different farmers).  In a monopoly, the product is unique.  In monopolistic competition, it is "differentiated" meaning that there is a difference, but that difference may only exist in the minds of conusumers (like with a brand-name pair of jeans and a generic pair).  Oligopolists can sell homogeneous products (like oil) or differentiated products (like cars).

Finally, there are the conditions of entry into the market.  In perfect competition, it is very easy for a new seller to enter the market while in a monopoly it is impossible.  In between those extremes, it is somewhat easy to enter in monopolistic competition but difficult in oligopoly.