Understanding the Corn Market Structure in Tap

In order to fully understand the island of Tap’s market for corn, the broad term market structure must be defined. Market structure exists as the makeup of companies operating in a specific market. The two basic types of structures remain as perfectly competitive markets and monopoly markets. These exist as the two most basic and opposite forms of market structure, many other forms exist in between these two. Applying these two forms of structure to the corn market in Tap, results in different outcomes of both quantity of corn produced and price at which corn sells. The examination and application to Tap’s corn market will correspond with the two forms. To begin, Tap’s corn market exists as a perfectly competitive market before the Mega Company

Just as certain conditions existed for a perfectly competitive market, the same goes for the monopoly form of a market. The first condition exists when only one firm operates in the market. Due to this condition, the monopoly firm equates to the market, meaning the firm sets whatever price it desires. The next condition pertains to barriers of entry. Barriers to entry occur when the monopolizing firm prevents any other firm from entering the market. Many ways of doing this exist, one way will be examined when looking at the corn market. The last condition of a monopoly occurs when no close substitutes can be found. This states no other product has the potential to substitute in place of the firm’s product. These condition apply to the corn market in Tap. The Mega Company remains the only firm selling corn in the market. They achieve this by purchasing all of the farmers’ corn and then selling it in the market. This outcome satisfies the first condition. The second condition exists as barriers of entry. The Mega Company produces this effect by buying corn from all of the farmers. The farmers sell their corn to the Mega Company at a higher price than selling it directly to the people at market value. This allows the Mega Company to purchase all of the corn from the farmers, producing a barrier to entry in the market. In order for the Mega

First, a perfectly competitive market provides low prices for consumer of the market. This exists as a pro for the consumers buying the product. In the example, it remains a pro for people purchasing the corn cheaply in Tap. When low prices exist in the market however, the burden is placed on the producers. This happens because the producers identify as price takers, and the price stays low due to competition. Low prices result in lower profits. On the island of Tap for example, low prices in a competitive market hurt the producers of corn. Meaning, farmers prefer the monopoly version of the market. The monopoly form results in farmers getting paid above the perfectly competitive market price. On the contrast, in a monopoly form prices remain higher for the consumers. The final pro of the monopoly form exists as the uniform packaging and quality. Since only one firm produces the specific product, they use the same quality and packaging throughout the process. This also be views as a con for the perfectly competitive side. This side uses many different forms of packaging and quality due to the various amounts of producing firms. Overall, many different pros and cons result when implementing various kinds of market