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Market structure and product diversity

The diversity of the product on the market is closely related to its structure. Of

the definition of the two extreme types of market structures - monopoly and perfect competition, it follows that the monopoly company and firms in perfect competition offer a homogeneous product on the market that does not need advertising.

In monopolistic competition, sellers in the same market often provide a variety of similar products. Sometimes the diversity generated by manufacturers wasting resources for the production of many virtually identical brands of products is irrationally great. Since ensuring diversity leads to unjustified costs, society should make the choice of producing only some of the vast quantities of goods and services. The limitation of the number of items of goods produced in most markets is offset by the economies of scale, that is, the production of a larger volume of each type of goods at low unit costs. If more products are produced by fewer firms, then prices and unit costs become lower.

The effectiveness of diversity also depends on the level of socio-economic development of the state in which the market is localized. As the economy develops and the wealth of people grows, increasing diversity becomes more effective as consumer demand for diverse goods increases. In a very poor country, only one firm produces enough to meet demand.
As the economy grows and consumer demand expands, opportunities for an influx of more firms open up and market structures evolve toward monopolistic competition, providing consumers with the benefits of diversity.

Gains from diversity can be gained by taking advantage of international trade. Most trading operations between industrialized countries are carried out within the same industry. This trade in the field of differentiated products provides people of the interacting countries with access to a wider range of products, each of which is produced for the world

market, therefore, can be produced on a reasonably large scale.

With an oligopoly, several large firms dominate the market (from about three to five). Oligopoly exists because it is difficult for competing firms to enter this market, since the cost of entering the market is high (in the automotive industry, the amount of capital needed for this comes to billions of dollars). For example, until the early 1960s. american auto industry

was an example of oligopoly. However, as companies from Japan, Germany, South Korea and some other countries came to the American automobile market, the structure of the automobile industry was transformed into monopolistic competition.
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Market structure and product diversity

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