The perfect competition is a model of the market in which many sellers and buyers interact. At the same time, all subjects of the market relations have equal rights and opportunities. For example, the market of cars may be designed so that new companies can easily enter it and offer new products. A distinctive feature of the perfect competition market is that a seller and a buyer cannot influence the price of the goods as it is determined by the market (Rios, McConnell, & Brue, 2013).
In some markets, there is almost perfect competition, including agriculture, securities, and precious metals. The long-run economic benefit of the mentioned model is associated with the attraction of new firms, each of which has the potential to enrich the market with services and products. In other words, such a model allows producing at the lowest cost.
The monopolistic competition is a type of market that presents a large number of manufacturers offering a lot of buyers a certain type of product, and each of them has an insignificant share of the industry (Rios et al., 2013). This market is open to all those who wish to participate in transactions, and all entities are fully informed of the terms and the quality of the goods. Unlike the market of perfect competition, monopolistic competition has heterogeneous benefits.
For example, the markets of soap, alcohol, or high street shops offer many of their varieties. Since every competitor sells a different type of a certain good, he or she acts as a monopolist in relation to his or her group of regular customers. In the long-term period, the economic benefit of the mentioned market type refers to the absence of entry barriers, increase in the supply, and normal profits for firms.
Oligopoly is an option of imperfect competition with a small number of large sellers on the market who have a big impact on customer prices and behavior. At the same time, other sellers may be on the market forced to focus on oligopolists and small unoccupied market niches (Carbaugh, 2016). Among well-known global oligopolistic markets, one can list the production of processors for personal computers such as Intel and Advanced Micro Devices (AMD) or large passenger aircraft dominated by two companies – Boeing and Airbus. The paramount economic benefits in the context of oligopoly are restricted output, price exceeding average costs, and high promotional costs.
Monopoly is a type of market structure with a single seller, dominating the whole industry of a service or a product that has no substitutes (Stiglitz & Rosengard, 2015). However, here economists are faced with the problem of determining the boundaries of the industry, which, in many respects, are set fairly arbitrarily. For example, the subway has a monopoly on passenger transportation by this mode of transport, but it is not a monopolist on the market of passenger traffic there are also buses, trams, et cetera. The support for loss-making services, international competition, and economies of scale compose the economic benefits of monopoly.
The concept of the economic benefit helps to understand that the government grants some companies with a status of monopoly based on their use of patents. Since they a have a patent on some goods or services, they may set prices and market conditions (Carbaugh, 2016). As a result, such companies are likely to receive super-normal benefits in a long-run along with the zero competition.
References
Carbaugh, R. (2016). Contemporary economics: An applications approach (8th ed.). New York, NY: Routledge.
Rios, M. C., McConnell, C. R., & Brue, S. L. (2013). Economics: Principles, problems, and policies. New York, NY: McGraw-Hill.
Stiglitz, J. E., & Rosengard, J. K. (2015). Economics of the public sector (4th ed.). New York, NY: WW Norton & Company.