Question

17. Name & explain one issue with a company having a very high leverage ratio. ( explain by ur own word and base on Australia firm plz)

18.

(a) Give three characteristics of each of the market structures

(b) Give two examples of each market form.

( explain by ur own word and base on Australia firm plz)

Market structure	Perfect competition	Monopolistic competition	Oligopoly	Monopoly
Features: 1
2
3
Examples: 1
2

Answer 1

Que 18 :(a)

Feature of perfect competition market :

1. Large number of buyers and sellers: In perfect competition, the buyers and sellers are large enough, that no individual can influence the price and the output of the industry. An individual customer cannot influence the price of the product, as he is too small in relation to the whole market. Similarly, a single seller cannot influence the levels of output, who is too small in relation to the gamut of sellers operating in the market.
2. Homogeneous Product: Each competing firm offers the homogeneous product, such that no individual has a preference for a particular seller over the others. Salt, wheat, coal, etc. are some of the homogeneous products for which customers are indifferent and buy these from the one who charges a less price. Thus, an increase in the price would let the customer go to some other supplier.
3. Free Entry and Exit: Under the perfect competition, the firms are free to enter or exit the industry. This implies, If a firm suffers from a huge loss due to the intense competition in the industry, then it is free to leave that industry and begin its business operations in any of the industry, it wants. Thus, there is no restriction on the mobility of sellers.

Features of Monopolistic Competition :

1. Product Differentiation: This is one of the major features of the firms operating under the monopolistic competition, that produces the product which is not identical but is slightly different from each other. The products being slightly different from each other remain close substitutes of each other and hence cannot be priced very differently from each other.
2. Large number of firms: A large number of firms operate under the monopolistic competition, and there is a stiff competition between the existing firms. Unlike the perfect competition, the firms produce the differentiated products which are substitutes for each other, thus make the competition among the firms a real and a tough one.
3. Free Entry and Exit: With an intense competition among the firms, the entity incurring the loss can move out of the industry at any time it wants. Similarly, the new firms can enter into the industry freely, provided it comes up with the unique feature and different variety of products to outstand in the market and meet with the competition already existing in the industry

Features of Monopoly Market:

1. Under monopoly, the firm has full control over the supply of a product. The elasticity of demand is zero for the products.
2. There is a single seller or a producer of a particular product, and there is no difference between the firm and the industry. The firm is itself an industry.
3. The firms can influence the price of a product and hence, these are price makers, not the price takers.
4. There are barriers for the new entrants.

Features of Oligopoly Market :

1. Few Sellers: Under the Oligopoly market, the sellers are few, and the customers are many. Few firms dominating the market enjoys a considerable control over the price of the product.
2. Interdependence: it is one of the most important features of an Oligopoly market, wherein, the seller has to be cautious with respect to any action taken by the competing firms. Since there are few sellers in the market, if any firm makes the change in the price or promotional scheme, all other firms in the industry have to comply with it, to remain in the competition.

   Thus, every firm remains alert to the actions of others and plan their counterattack beforehand, to escape the turmoil. Hence, there is a complete interdependence among the sellers with respect to their price-output policies.

3. Advertising: Under Oligopoly market, every firm advertises their products on a frequent basis, with the intention to reach more and more customers and increase their customer base.This is due to the advertising that makes the competition intense.

   If any firm does a lot of advertisement while the other remained silent, then he will observe that his customers are going to that firm who is continuously promoting its product. Thus, in order to be in the race, each firm spends lots of money on advertisement activities..

(b)

Examples of Perfect Competition:

1. Agricultural markets. In some cases, there are several farmers selling identical products to the market, and many buyers. At the market, it is easy to compare prices. Therefore, agricultural markets often get close to perfect competition.
2. Internet related industries. The internet has made many markets closer to perfect competition because the internet has made it very easy to compare prices, quickly and efficiently (perfect information). Also, the internet has made barriers to entry lower. For example, selling a popular good on the internet through a service like e-bay is close to perfect competition. It is easy to compare the prices of books and buy from the cheapest. The internet has enabled the price of many books to fall in price so that firms selling books on the internet are only making normal profits.

Examples of monopolistic competition:

Example 1 – Fast Food Company

The Fast Food companies like the McDonald and Burger King who sells the burger in the market are the most common type of example of monopolistic competition. The two companies mentioned above sell an almost similar type of products but are not the substitute of each other. Now which product the particular consumer likes the most and of which company totally depends on him. Apart from the burger, other products are also sold by these companies like French fries soft drinks, etc. All these products of the mentioned companies are of similar nature but there is no congruency between the products sold by the two as each one has a slightly different shape and taste. This is the monopolistic structure..

Example 2 – Hairdresser

The service provided by the hairdressers in the market provides one of the most famous types of the example of the monopolistic competition. There are certainly lots of hairdressers and each of the hairdressers has a slightly different type of skill and thus each one of them sells a slightly differentiated product to the consumer in the market. Also, they have different premises situated in a different location where they provide the services. These things differentiate the product in the eyes of the consumers. The hairdresser service is not the big chain industry and thus keeps them away from the more oligopolistic market structure.

The prices offered by the hairdresser will depend on the services offered by them and its uniqueness. If the particular hairdresser is known for providing the best services in the particular market then it can increase the prices of its services as they know that consumers can pay slightly more amount of money for their superior services. The uniqueness gives the power to charge more amounts. Thus it is the service that gives reputation to the firms for the quality they are offering. Also relatively there is a low barrier for exit and entry for setting up a new hairdresser shop which is one of the important features of the monopolistic structure..

Examples of Oligopolies ::

1. Operating systems for smartphones and computers provide excellent examples of oligopolies. Apple iOS and Google Android dominate smartphone operating systems, while computer operating systems are overshadowed by Apple and Windows.
2. Automobile manufacturing another example of an oligopoly, with the leading auto manufacturers in the United States being Ford (F), GMC, and Fiat Chrysler.

Monopoly Examples:

1.One can’t even think of the internet layout without Google. Its competitors are Microsoft and Yahoo but they own a very small share in the market that too in the downward trend. Google makes the majority of money from advertising and the same can be clearly seen that it controls 60% of the global advertising revenue. It has a good revenue generation through the process of harvesting user data with the track over our online activity and popping up with the advertisement as per our searching history and locations. Smaller advertisers lag as they are not having the level of user data as Google is having. Thus Google undoubtedly is one of the largest monopolies in present in the world. The company, in fact, monopolizes several other different markets in the world..

2.The social media market which we can’t think is ripe for monopoly but it is. Facebook is the leader in the social media market with a maximum percentage of the market share. It is considered to be a monopoly because it lacks direct competition for any competitor, it has the pricing power and it has the dominant user base all over the world.