Market Structure Paper

1437 words - 6 pages

The Four Different Market Systems in an Economy

University of Phoenix

Everyone has eaten at least once at one of the many thousands of McDonalds or Burger King’s around the world. Most consumers consider the price of their signature hamburger sandwich very affordable. But how is the price of for example the Big Mac or The Whopper established? Do both companies compete against each other or are their products so different and unique, allowing them to create a monopoly or oligopoly? The supply and demand of both the Big Mac and Whopper will depend on price, taste and marketing. Some consumers will prefer the Whopper above the Big Mac, and as such will be prepared to pay a higher price ...view middle of the document...

Public goods and common resources can share functions, such as national parks and forests/land. They can overlap qualities and remain very different entities. Private goods and natural monopolies are very much the same in that a private business may be the most efficient provider of the good/service, serving as both a supplier of a private good and a natural monopoly.

When it comes to reality, the free market action doesn’t always have an outcome in the best possible equilibrium for labor markets across the region where labor mobility leads to fairness of income along with, markets where supply and demand are in check. Bar-El (2006), states that the “spatial mismatch hypothesis” is defined as “the dispersal process of jobs from the center to suburbs creates a distorted equilibrium with high levels of employment and income in the suburbs, and unemployment and low income in the center” (p. 393). The existence of a housing segregation creates the result of the hypothesis. The implication is where an external problem obstructs the action of the free market procedure which may lead to a balance containing equal levels of income and employment. The outcome is a government need to get involved with recommendatory measures like transfer payments and social assistance.

According to Figart and Mutari (1997), viewing our contemporary economic trends, agreement has been made that a new era of flexibility has been rapidly entered. Three elements of flexibility have been either executed or promoted to alternate degrees. The first two elements are employment and wage flexibility and the third element is functional flexibility. The first two elements ensure supply and demand services in the external labor markets, which in turn signals return to classical ideas of free market balance. Now the third element commences flexibility within organizations and the manufacturing process.

McDonald’s is a firm in a monopolistic competition market structure. Many different sellers are a part of the fast food markets that offer a variety of products. This type of structure also has the characteristic of free entry and exit. The concept of free entry and exit to this market has been very beneficial to McDonalds. When a person thinks of entering and exiting this market he probably thinks of selling or not selling hamburgers. However, inside the market there is an entering and exiting that the sellers can do. McDonalds is not just a one-company firm. They have opened restaurants in many countries. For example, they worked together with Japan for many years. Japan-McDonalds even owned two restaurants here in the United States. When this joint venture ended McDonalds in America kept their local restaurants. McDonalds Corporation has owned or has had shares in other restaurants such as Boston Market and Chipolte Mexican Grill. In 2007 McDonalds Annual Report shows that they received “$479.6 million of tax-free gain from the Company’s...

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