Indicate the most likely market structure that each of the following business would be in: (a) Hairdresser (b) Dairy farmer (c) Biscuit manufacturer (d) KTM Komuter (A commuter rail system) (e) International airline Justify your answers

See below.

(a) Hairdresser - Perfect Competition

• The barriers to entry for this market are very low. There is very little start-up investment required for new entrants and the required skills can be acquired with general ease (e.g. a 9-month course). There are multiple players in the market that are price takers (i.e. prices can be negotiated and the buyer has some power).

(b) Dairy farmer - Oligopoly

• Although, technically, anyone can get a cow and start milking it, the leading firms in this industry (e.g. Saputo Inc) have achieved a level of economies of scale that is so great that new entrants cannot compete with their prices.

(c) Biscuit manufacturer - Oligopoly

• Once upon a time, this industry was a perfect competition since all firms had similar resources and the same negotiating power. Nowadays, some firms have accumulated a large portion of the total market share (e.g. Christie) and have achieved economies of scale. This, in turn, reduces the threat of new entrants and increases the power of these select firms.

(d) KTM Komuter (A commuter rail system)- Monopoly

• A commuter rail system is the only rail system available to the population, and thus they control the entire supply of rail transportation in their jurisdiction.

(e) International airline - Oligopoly

• The high initial capital investment (i.e. planes that cost $100 Million each) and the limited access to airports that are already crowded with flights makes it very difficult for new entrants to penetrate the market. In addition, there are a few companies (e.g. Delta, United, etc.) that control the majority of the market share.