Republic of the Philippines

Department of Education
National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center Arroceros Forest Park
Antonio J. Villegas St. Ermita, Manila

Applied Economics

Market Structures

www.vector.com

Quarter 1 Week 5 Module 5

Learning Competency

 Differentiate market structures in terms of

number of sellers, types of products, entry/exit
to market, pricing power, etc.
 HOW TO USE THIS MODULE?
Before starting the module, I want you to set aside other task/s that
may disturb you while enjoying the lessons. Read the simple
instructions below to successfully enjoy the objectives of this kit. Have
fun!

Follow carefully all the contents and instructions indicated

in every page of this module.
Write on your notebook the concepts about the lessons.
Writing enhances learning that is important to develop
and keep in mind.
Perform all the provided activities in the module.
Let your facilitator/guardian assess your answers using the
answer key card.
Analyze conceptually the posttest and apply what you have
learned.
Enjoy studying!

PARTS OF THE MODULE

 Expectations - These are what you will be able to know after completing
the lessons in the module.
 Pre-test - This will measure your prior knowledge and the concepts to be
mastered throughout the lesson.
 Looking Back to your Lesson - This section will measure what
learnings and skills did you understand from the previous lesson.
 Brief Introduction- This section will give you an overview of the lesson.
 Activities - This is a set of activities you will perform with a partner.
 Remember - This section summarizes the concepts and applications of
the lessons.
 Check your Understanding - It will verify how you learned from the
lesson.
 Post-test - This will measure how much you have learned from the entire
module

1
 LESSON
5
DIFFERENT MARKET STRUCTURES

EXPECTATIONS

You will represent real-life situations on market and its structures.

Specifically, this module will help you to:

1. differentiate various market structures in terms of number of sellers,

types of products, entry/exit to market and pricing setting power
2. construct a graph detailing characteristics of each market structure
3. appreciate the importance of being competitive in the market

PRE-TEST

Before you equip yourself with a new set of knowledge, let us check your
understanding about the topic. Enjoy answering!

Part I. Matching Type

Directions: Match the following market structures (SET A) with their

characteristics (SET B). Write the letter on the space provided for each
number.

SET A SET B
1.Perfect A. A. Sole seller has the full power to set prices
competition
2.Monopolistic B. Entry is difficult and huge capital investment
competition may be the barrier to enter the industry
3. Oligopoly C. Sellers offer close substitutes to the end users

4. Monopoly D. Homogeneous product is offered by many and

small sellers

Great job! You finished answering the questions! If you do not have any questions, you
may now proceed to the next activity. Enjoy answering.

2
Part II. Enumeration of Market Structure’s Characteristics

Directions: Observe some industries in your locality. Using the graphic

organizer below, enumerate the characteristics that you know about the
common market structures in terms of: A) types of product/s, B) pricing power,
C) number of sellers, and D) entry/exit barriers. Write the answers inside the
boxes.

A
B A
C B
D C
D

A
B
C A
D B
C
D

https://www.toppr.com/guides/business-economics/meaning-and-types-of-markets/types-of-market-structures/

Great, you finished answering the questions. You may request your facilitator to check your
work. Congratulations and keep on learning!

LOOKING BACK TO YOUR LESSON

Last module we discussed the implications of market pricing in

making economic decisions. The prices can have impacts in the demand
and supply of products that we buy. When there is an excess demand for
the quantity supplied, there is shortage in the supply of products. When
there is an excess in supply, there is surplus. When the supply and
demand curves intersect, there is equilibrium. The market price or
equilibrium is the state in which the market supply and demand balanced
each other and as a result the prices become stable (Source: investopedia).

3
 When the entrepreneurs offer products in the market, they set prices. We
tend to respond on their prices by the quantity of products we buy from them.
The concept of elasticity applies. The price elasticity shows our responsiveness
or the way we react when the price of products changes. It measures the
quantity demanded or supplied of a certain good to a change in its price.
Elasticity can be described as: a) elastic (or very responsive with the changes
in the prices of products, that is when it is easy to find for a substitute product
when the price of the product increases and b) unit elastic, or inelastic or not
very responsive with the changes in the prices of products. (Sources: investopedia)
& (ER services 2020).

Let us check your retention on the knowledge you gained from last module

Part I. Multiple Choice Questions

Directions: Please read and analyze the questions carefully. For each item,
encircle the correct answer.

1. In the market, the price elasticity for the demand of ethyl alcohol sold by the
ABM Drug Store is the:
a) ratio of the percentage change in quantity demanded for the ethyl alcohol to
the percentage change in its price.
b) responsiveness of revenue to a change in quantity of the ethyl alcohol
c) ratio of the change in quantity demanded divided by the
change in its price of the ethyl alcohol.
d) response of revenue to a change in the price of ethyl alcohol

2. If demand for the banana lakatan of a vendor in the market is elastic, then a
a) rise in the price of banana lakatan will raise the total revenue
b) fall in the price of banana lakatan will raise total revenue of the vendor
c) fall in the price of banana lakatan will lower the quantity demanded
d) rise in the price of banana lakatan won't have any effect on total revenues

3. If the cross-price elasticity between sinamon bread and pizza is 1.5,

a) the two goods are luxury goods
b) the two goods are complements
c) the two goods are substitutes
d) the two goods are normal goods

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4. The price elasticity of demand for a certain good tends to be:
a) smaller in the long run than in the short run
b) smaller in the short run than in the long run
c) larger in the short run than in the long run
d) unrelated to the length of time
5. If the price elasticity of supply of ripe mangoes is 0.60 and the price will
increase by 3 percent, then the quantity supplied for ripe mangoes will increase
by how much?
a) 0.60 percent
b) 0.20 percent
c) 1.8 percent
d) 18 percent

https://global.oup.com/us/companion.websites/9780199811786/student/chapt2/multiplechoice/

Great job! You have answered the first part of our activity.
You may now proceed to the second part.

Part II. Elastic and Inelastic Demands

Directions: Determine which of the following goods or services are likely to have
elastic and inelastic demands. Put check on the column.
GOODS/SERVICES ELASTIC INELASTIC
DEMAND DEMAND
1 Home heating oil
2 Softdrinks
3 Chocolate
4 Water
5 Heart medicines
6 Biscuits
7 Gasoline
8 Coffee
9 Medical procedures
10 Concert tickets

Source: https://www.sparknotes.com/economics/micro/elasticity/problems/

5
 BRIEF INTRODUCTION

Before we explore further our new lesson, read and analyze the
statements below. This is a “think, learn and challenge” opportunity for you to
connect more to the ideas on market and its structures.

We think the Mac Apple will sell

millions, but we didn't build the Mac for
anybody else. We built it for ourselves.
We were the group of people who were
going to judge whether it was great or
not. We weren't going to go out and do
market research. We just wanted to
build the best thing we could build.
Steve Jobs
https://int.search.tb.ask.com/search/AJimage.jhtml?
https://www.brainyquote.com/quotes/steve_jobs_416924?src=t_market

What Are Market Structures?

Business firms comprise a big portion of the economy. Everywhere you go,
there is business. In the economy, firms differ from one another on how to
allocate their resources to produce the products and how to deliver them to the
consumers. They have to plan how to meet the demands of the consumers and
participate in the market with identified or non-identified competitors. From
the statements of the founder of Apple, would you agree that the secret for
being successful in the industry is to build the best thing (innovate the
product) and not more on the market structuring? As a customer and
entrepreneur, do you agree that market structures are important
considerations to be competitive in the market? You can at least answer these
questions when you appreciate more the concepts of the market and its
structures.
When a firm enters the market world, it has to decide for the ideal
market structure in order stay longer in the industry. Take note that, to assess
the business environments, is a big help to remain competitive in the market.
Let’s get to know about the different market structures. In the article of AU
Online (2017), A Guide to Types of Market Structures, it defined market
structure as a starting point for assessing economic environments of firms. It
also mentioned market structure as a tool of understanding of how companies
and markets work allows business professionals and leaders to accurately
judge industry and market news, policy changes and legislation and how the
economy shapes important decisions. https://online.aurora.edu/types-of-market-structures

6
The Market Structures and Characteristics

Let us proceed analyzing the market

structures. Each market structure has
characteristics which determine the relations
between the sellers to another, of sellers to
buyers, company to investors, economists to
government and more which affect the
behavior and interaction of buyers and
sellers. Remember that the term market is
a set of buyers and sellers who determine
the price of goods and services. source: www.vector.com

Some of the market structure’s characteristics include: type of the

products produced, number and size of sellers and buyers, price of products
sold in the market, the ease or difficulty of entering and exiting the industry
and the number of companies in the market (AU Online 2017).

Pure (Perfect) Competition

 Many and small sellers and no

one can affect the market
 Homogeneous product is
offered by the companies
 Free entry to and exit from the
industry
 All firms only have the motive of
profit maximization
 No concept
of consumer preference
 Consumers can dictate the price www.dreamstime.com
 Examples: agricultural markets such as wheat, cereals foreign exchange
markets, etc.

7
Monopoly
* A single seller and no competitors
in the market Limited stocks
*Very unique and highly predictable only!!!
product or no close substitutes
* The firm is the price maker and
the firm has considerable control
over the price
*It can control the quantity supplied
* Entry/exit is difficult and blocked
* Sole seller has the full power to set
prices
*Examples are public
transportations like MRT, computer
software manufacturer like Microsoft www.ayokay.com

Monopolistic Competition
 Multiple giant firms produce similar
and highly predictable products
 Profit maximization occurs
 where MC=MR
 Firms compete for economic profits
 A competitive market that has only
a handful of buyers and sellers
 Sellers offer close substitutes
products to consumers
 Comparatively easier entry and exit
 Examples: cosmetics, garments,
medicines, shoes, car washes, automotive services, etc.
www.clipart.eamil.com

Oligopoly
 Few large firms in the industry
 Standardized or differentiated
products/goods
 Various barriers to enter the market,
entry is difficult and huge capital
investment may be the barrier to enter
 The firms set and control their prices
 Examples: aluminum and steel, oil and
gas, automobile, airlines,
entertainment, hotel and restaurants,
coffee shops, etc.
Are you enjoying our lessons? Let us try to answer the other activities so you can
be more confident of your earned knowledge.

8
 ACTIVITIES

Let us check your understanding on the topics that we just discussed.

Activity 1. Identification

Directions. Read the questions carefully. Identify the type of market

structure for each item.

1) If Company A competes with several firms in the industry but with

product homogeneous to their offers on shelves, what market structure
does it enter? _________________________________

2) If BCX Company competes with few large firms in the industry but with
differentiated products they offer on shelves, what market structure does
it enter? _________________________________

3) If there are several barriers on the entry and exit of firms in the industry
due to huge amount of capital needed, what market structure are they
in? ____________________________

4) If Company X is the only provider of electricity energy in Metro Manila,

what market structure does it join? __________________________

5) ABM Supermarket has joined many and small marketers in the industry
with several competitors selling the same products. What market
structure does it join? ____________________________________

Activity 2. Enumeration

Directions: Accomplish this activity independently. Below is the list of some

industries which dominate the market. Enumerate the industries which are
considered perfect competitors, monopolists, monopolistic competitors and
oligopolists.

agricultural markets, internet providers, foreign exchange (FOREX)

markets electricity provider, public (MRT) transport, telecom companies,
gasoline stations, auto/car companies, flower shops, barber shops, car
wash services, automotive services (source: educba.com)

9
 Sample Industries and Market Structures

Perfect Monopolists Monopolistic Oligopolists

Competitors Competitors

1 1 1 1

2 2 2 2

3 3 3 3

REMEMBER

 There are different market structures that can characterize an economy:

perfect competition, monopolistic competition, oligopoly, and monopoly.
Each of them has its own set of characteristics, which in turn affects the
decision making of firms and the profits they can make.

 In perfect competition, it is assumed that: (1) all firms maximize profits (2)
there is free entry and exit to the market, (3) all firms sell completely
identical (i.e., homogenous) goods, (4) there are no consumer preferences.

 In monopolistic competition, it is assumed that: (1) all firms maximize

profits (2) there is free entry, and exit to the market; (3) firms sell
differentiated products (4) consumers prefer one product over the other.

 Oligopoly structure of the market assumed that: (1) all firms maximize
profits, (2) oligopolies can set prices, (3) there are barriers to entry and exit
in the market, (4) products may be homogenous or differentiated, and (5)
only a few large firms that dominate the market, and finally

 The following assumptions are made for monopolies: (1) the monopolist
maximizes profit, (2) it can set the price, (3) there are high barriers to entry
and exit, (4) there is only one firm that dominates the entire market .
https://quickonomics.com/market-structures

10
 CHECK YOUR UNDERSTANDING

Let us check your understanding on the topic. Have fun!

Part I. Fill-in the Blanks

Directions: Read the sentences carefully. Write the missing word in each
item.
1. There is a free entry to and exit from the industry in a
____________________ market structure.
2. In monopoly, there is a unique product and no close ________________
for the firm’s product.
3. In monopoly, the firm and industry are synonymous. No _____________
is observed.
4. In oligopoly, the ______________ is difficult and huge capital
investments are needed to penetrate the market.
5. In _________________________, multiple firms produce similar and
highly predictable products.

Part II. Enumeration

Directions: Observe the behaviour of the nearest market in your locality. In
the columns are the characteristics of the different market structures.
Describe the market structures of the industries in the market as to number
of sellers, pricing power, type of goods or services, and barriers to entry and
exit. Complete the chart.
MARKET STRUCTURES AND CHARACTERISTICS
MARKET NO. OF CONTROL OVER TYPE OF BARRIERS TO
STRUCTURES SELLERS/ PRICE/PRICING GOODS or ENTRY/
FIRMS POWER PRODUCTS EXIT TO MARKET
Pure/Perfect
Competitors

Monopolists

Oligopolists

Monopolistic
Competitors

11
 POST-TEST
Post-Test

Directions: Read the questions carefully. Choose the letter of the correct
answer. Encircle your answer.

1. Which does not belong to the group of market structures?

a) Monopoly c) Perfect Competition
b) Oligopoly d) Market Competition
2. Which of the following is the most competitive market structure?
a) Perfect competition c) Oligopoly
b) Monopolistic competition d) Monopoly
3 Which of the following is the least competitive market structure?
a) Perfect competition c) Oligopoly
b) Monopolistic competition d) Monopoly
4 Which of the following is NOT a feature of a monopolistic competition?
a) Numerous sellers c) Numerous buyers
b) Product differentiation d) Homogenous price
5 What market structure if price is the key for competing with other firms?
a) Monopoly c) Monopolistic competition
b) Oligopoly d) Perfect competition
6. When the revenue is equal to price, which types of market structure?
a) Competitive monopoly c) Perfect competition
b) Oligopoly d) All are types
7. Which of the following is NOT a type of market structure?
a) Competitive monopoly c) Perfect competition
b) Oligopoly d) All are types
8. If ABM firm sells its output in a market, with many sellers and buyers of
homogeneous product, and unlimited resource mobility, the structures is a/an
a) monopolist c) perfect competitor
b) oligopolist d) monopolistic competitor
9. If the ABM firm sells homogenous products in a market, with a single seller and
many buyers, for which there are no close substitutes to the products, it is a/an
a) monopolist c) perfect competitor
b) oligopolist d) monopolistic competitor
10. If ABM firm sells its differentiated products in a market, with many sellers and
buyers, the structure is a/an
a) monopolist c) perfect competitor
b) oligopolist d) monopolistic competition

http://www.sanandres.esc.edu.ar/secondary/economics%20packs/microeconomics_sl/page_26.htm
https://global.oup.com/us/companion.websites/9780199811786/student/chapt9/multiplechoice/

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 Learning Module for Applied Economics

REFLECTIVE LEARNING SHEET

The market has always been competitive due to entries of potential

companies in a specific industry. However, due to the economic issues that
our country has been suffering since the imposition of lockdowns all over
Metro Manila, several industries have to cut down their operations before
they lost all their assets and revenues. The Covid 19 pandemic has a great
impact on business overall operations.
In your assessment, what structures of business industries could
sustain their operations in the long run? Is there any or specific structure
which really can easily dominate and exit the market? Defend your answer.

www.vector.com

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

E-SITES
E-si

To further explore the concept learned today and if it possible to connect the internet,
you may visit the following link:
https://www.youtube.com/watch?v=9Hxy-TuX9fs

13
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 Learning Module for Applied Economics

REFERENCES

Articles
Hawks, D. (2020) Perfect Competition in Economics & Adam Smith's 'Invisible
Hand. Retrieved on June 05 2020 from https://study.com/academy/lesson/perfect-
competition-in-economics-adam-smiths-invisible-hand.html

Pettinger, T. (2019). Monopolistic Competition – definition, diagram and examples

Retrieved on June 05 2020 from
https://www.economicshelp.org/blog/311/markets/monopolistic-competition
Suman, S. K. ( 2015) Pure Competition And Perfect Competition. Retrieved on
June 05 20202 from https://www.lawctopus.com/academike/pure-competition-
perfect-competition/

Trivedi, M. (2013) Market Structure and Types of Market Structure

Retrieved on June 05 2020 from
https://www.slideshare.net/mithileshtrivedi581/market-structure-and-types-of-
market-strucyure

Zeder, R. (2020) The Four Types of Market Structures. Retrieved on June 27 2020
from https://quickonomics.com/market-structures

Websites
http://www.sanandres.esc.edu.ar/secondary/economics%20packs/microeconomics_
https://global.oup.com/us/companion.websites/9780199811786/student/chapt9/multplechoice
https://www.slideshare.net/mithileshtrivedi581/market-structure-and-types-of-
market-strucyure
http://www.sanandres.esc.edu.ar/secondary/economics%20packs/microeconomics_
https://examples.yourdictionary.com/oligopoly-examples.html
https://online.aurora.edu/types-of-market-structures/
http://economicsondemand.weebly.com/lesson-1-market-structures.html
https://www.toppr.com/guides/business-economics/meaning-and-types-of-
markets/types-of-market-structures/
http://s3.amazonaws.com/files.haikulearning.com
https://www.wallstreetmojo.com/monopoly-vs-monopolistic-competition
https://int.search.myway.com/search/AJimage.jhtml
https://policonomics.com/lp-market- structures-market-structure
https://www.britannica.com/topic/price-system
https://quickonomics.com/market-structures/
http://dreamstime.com
http://pluspng.com

142
 Learning Module for Applied Economics

Acknowledgment

Writer: Ellaine I. Dela Cruz, DBA

Editor: Isabel A. Gumaru

Evaluator: Ellaine I. Dela Cruz, DBA

Validators & Reviewers:

Remylinda T. Soriano, EPS
Angelita Z. Modesto, PSDS
George B. Borromeo, PSDS

Management Team :
Maria Magdalena M. Lim, Schools Division
Superintendent-Manila
Aida H. Rondilla, Chief Education Supervisor
Lucky S. Carpio, EPS In Charge of LRMDS
Lady Hannah C. Gillo, Librarian II-LRMDS

15
3
 Learning Module for Applied Economics

ANSWER KEY

PRE-TEST

Part 1 Matching Type

1. D 3. B 5. C
2. C 4. A

Par II. Market Structures and Characteristics

1. Perfectly Competitive Market

Number of Sellers- many small competitors in the industry
Products - all firms sell the exact same product
Price- all firms are price takers and consumers can dictate the price
Barriers to exit and entry - low barriers and costs to entry and exit

2. Monopoly
Number of Sellers- A single seller and no competitor
Product - unique product and no close substitutes for the firm’s product
Price- the firm is the price maker and has a control over the price
Barrier to entry/exit- entry or exit is blocked

3. Monopolistic competition
Numbers of sellers - multiple firms produce similar products
Products - highly unpredictable products
Price - firms compete for economic profits
Barrier to entry/exit - comparatively easier entry and exit

4. Oligopoly
Number of sellers - few large firms in the industry
Products - standardized or differentiated products/goods
Barrier to entry/exit- entry is difficult
Price - firms can control the prices of the products

LOOKING BACK TO YOUR LESSON

Part I. Multiple Choice Questions
1) A 3) C 4) B
2) B 5) C

Part II. Elastic and Inelastic Demands

a) Elastic demand: Softdrinks, Chocolates, Biscuits, Coffee
b) Inelastic demand: Home heating oil, Bottled water, and Heart medicines
Gasoline, Medical procedures, Concert tickets

16
4
 Learning Module for Applied Economics

ACTIVITIES
Activity I Identification

1. Perfect Competition 3. Oligopoly 5. Perfect

2. Oligopoly 4. Monopoly Competition

Activity II Enumeration (In no particular order)

Perfect Competitors Monopolists Monopolistic Oligopolists

Competitors

1 agricultural markets 1 electricity 1 carwash services 1 telecom

provider companies
2 internet providers 2 MRT transport 2 flower shops 2 gasoline
stations
3 foreign exchange 3 software 3 barber shops 3 auto/car
markets manufacturer companies

CHECK YOUR UNDERSTANDING

Part I Fill-In the Blanks

1. Pure Competition 4. Entry
2. Substitute products 5. Monopolistic Competition
3. Competition

Par II Refer to Market Structures and Characteristics for the possible answers on:

1. Perfectly Competitive Market

2. Monopoly
3. Monopolistic competition
4. Oligopoly

POST-TEST
1 D 5 D 9A
2 A 6 C 10 D
3 D 7 A
4 D 8 C

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5