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Running head: MARKET STRUCTURES 1

Market Structures

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Market Structures

MARKET STRUCTURES 2

Market Structures case study from the Island of Tap

Introduction

People from the Island of Tap are exposed to two market structures namely, monopoly and

perfect competition. Several factors contribute to the occurrence of the named market structures.

The shift from the market structure known as perfect competition to that of monopoly has

happened for the inhabitants of the Island (Tap). Antagonism between the sellers of corn in the

Island was initially fierce and this made the price of corn to be antagonistic and low. After the

company (Mega Company) brought together all corn farmers in the Island into a single facility,

the price of the product started to rise. This was because a single organization started to sell the

produce and by this, there was no rivalry (Weller, Kleer & Piller, 2015). In this regard, Mega

Company had the freedom to set the price of the commodity at whichever it desired.

When the farmers could sell their self-produced corn, the market structure of tap Island

was that of perfect competition. Weller, Kleer & Piller (2015) argue that in a market structure

which is perfect competition, there is lack of exit as well as entry barriers and this makes it easy

for anybody to enter the market. Obviously, the market for corn is usually homogeneous.

Regardless of the person who sells corn, it is more likely to be similar. Therefore, in the case study

provided that demonstrates perfect competition, the cost of corn was tremendous because there

was a lot of competition among the farmers. Moreover, the farmers lacked the privilege of setting

prices for their products (corn). The farmers did not benefit in this type of competition (perfect

competition).

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On the other hand, the advantages and benefits of the perfect competition were felt by the

consumers in the Island of Tap. This is because a consumer in the Island of Tap did not get amused

with the product and also the price of one seller, he or she had a chance of going to another seller

elsewhere and buying the commodity. However, when Mega Company that was the Island's local

beef manufacturer began to purchase all the corn from the farmers and started to package it in a

single facility, the market turned to become a type of monopoly. The main problem with this type

of market is that the company (in this case Mega Company) becomes the sole price maker. Even

if the unvarying quality of corn overjoys the people of Tap Island, there is lack of competition. It

is evident that the company set the value of corn to be higher as opposed to the time when the

product was sold in a market structure known as competitive that was evident when each farmer

sold his or her produce directly. Also because the company in our case is purchasing all produce

of corn in the Island of Tap, there are no opportunities for other companies or a single company to

enter the market (McKenzie & Lee, 2016). Therefore, the actual winner in this type of market

structure is obviously Mega Company because it will make profits now that there are no close

substitutes.

In case the people of this Island (Tap) want the price of corn to go down, they should refuse

the corn, and this would compel the organization (in our case mega-company) to reduces its price.

A big problem of a monopoly structure of the market is that it always sells commodities that a

person must have and are needed by an individual (Auer & Schoenle, 2016). That is the reason it

is a monopoly already. In fact, corn is good and necessary. It is needed for whichever delicious

thing. In fact in Brazil corn is essential in fuel making. Farmers in the Island of Tap are overjoyed

that they do not see the essence of going to the markets and sell their produced corn, but I am sure

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the farmers are not getting huge returns by selling the product to the monopoly company.

Nevertheless, the monopoly cannot be bad to the people of Tap Island since they can be willing to

pay higher for the uniform quality as well as the packaging, but truly, the people do not have a

choice.

A good example of a monopoly is the gas company. We stay in a particular place, and we

are compelled to purchase from the company. In case we fail to pay the price that they set, it

implies that we will not get access to warm water. In this regard, we lack a choice. On the other

hand, a good example of the perfect competition structure entails of the farmers in the marketplace.

An individual can make it to any farmers market or grocery store and different prices as well as

qualities. The small Island of Tap initially began with a market structure that was price competition

but later on it shifted to become a monopoly.

Conclusion

Lastly, if we get to compare the previous situation with the current one, there will be several

changes. Look at the previous situation, the number of sellers is big, and they sell their produce

individually. In light of this we can say there are many buyers and sellers. This is market structure

known as a monopolistic market, and low prices characterize it. On the hand, when Mega Company

entered the corn market, it became the buyer for all the produced corn and changed the bought

corn into its brand name and began to sell the corn as a sole seller. In this regard, the situation in

the market has shifted since for final consumers of the produce (corn) there is a single seller, and

the large numbers of consumers still exist. This means the market has now shifted into a monopoly

market that is characterized by the ability of the seller to set prices. This is what made the price of

corn to increase in the Island of Tap.

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References

Weller, C., Kleer, R., & Piller, F. T. (2015). Economic implications of 3D printing: Market

structure models in light of additive manufacturing revisited. International Journal of

Production Economics, 164, 43-56.

McKenzie, R. B., & Lee, D. R. (2016). Microeconomics for MBAs: The economic way of

thinking for managers. Cambridge University Press.

Auer, R. A., & Schoenle, R. S. (2016). Market structure and exchange rate pass-through. Journal

of International Economics, 98, 60-77.

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