Clearly explain the different market structure and how they determine the degree of competition among firms and how they maximise profits in the short run and long run

Cite the source within the text and bibliography

Market structures refer to the various types of market organization that exist in an economy. They differ based on the number of firms operating in the market, the type of product being sold, barriers to entry, and the level of control each firm has over price.

The four main market structures are:

1. Perfect competition: In a perfectly competitive market, there are many small firms producing identical products. Entry and exit barriers are low, and firms have no control over the market price, as it is determined by supply and demand. These firms maximize profits in the short run by producing where marginal cost equals marginal revenue, and in the long run, by producing where marginal cost equals price. (Source: Mankiw, Principles of Economics, 8th Edition)

2. Monopolistic competition: Monopolistic competition is characterized by many firms selling similar but differentiated products. Each firm has a small degree of market power due to product differentiation, allowing them to set their own prices to some extent. In the short run, firms maximize profits by producing where marginal cost equals marginal revenue. In the long run, new firms may enter or exit the market, and existing firms adjust production levels to maximize profits. (Source: Sloman, Essentials of Economics, 7th Edition)

3. Oligopoly: In an oligopoly, a few large firms dominate the market and often sell similar or identical products. They have significant market power, allowing them to exert control over prices. In the short run, firms maximize profits by considering how their actions will affect competitors' reactions. In the long run, they may engage in strategies such as price matching or product differentiation to maintain market share and maximize profits. (Source: Mankiw, Principles of Economics, 8th Edition)

4. Monopoly: A monopoly exists when a single firm is the sole provider of a particular product or service without close substitutes. This gives the firm substantial market power, allowing it to set prices. In the short run, a monopoly maximizes profits by producing output where marginal cost equals marginal revenue. In the long run, it may engage in actions to maintain its monopoly status, such as engaging in research and development or acquiring competitors. (Source: Mankiw, Principles of Economics, 8th Edition)

Bibliography:
Mankiw, N. G. (2017). Principles of Economics. Cengage Learning.
Sloman, J., Wride, A., & Garratt, D. (2017). Essentials of Economics. Pearson Education Limited.