Final answer:
Competition varies across market structures, affecting pricing, profits, and consumer choice. Perfect competition features many firms with identical products competing on price, while monopoly involves a single firm with significant pricing power. Monopolistic competition and oligopoly fall in between, with firms competing on product differentiation and potentially strategic pricing or collaboration.
Step-by-step explanation:
Competition influences various market structures in different ways. The market structures include perfect competition, monopoly, monopolistic competition, and oligopoly.
In a perfect competition market, a large number of buyers and sellers deal in identical products. Here, competition is at its highest level because companies compete mainly on price, as products are similar and entry to the market is relatively easy. This results in minimal profits for firms as the prices tend to gravitate toward the cost of production.
In a monopoly, one company dominates the market without any significant competition. The monopolist has significant control over pricing and can maintain high profits. They do not compete on price but may seek to improve their product to maintain market dominance.
Monopolistic competition is characterized by many firms that sell differentiated products. Here, competition occurs through product differentiation, advertising, and branding, giving firms some control over their pricing. Over time, market entry by new competitors can erode profits.
An oligopoly market has a small number of firms that have a significant market share. In oligopolies, businesses may compete through price wars, advertising, and product innovation, but they also have the temptation to collude and set prices, behaving more like a monopoly.