Assignment 1 Market Structures

Assignment 1 Market Structures Most European countries have nationalized their universities and colleges. Consider that some countries have also used the law to ban private colleges. Should higher education be classified as a natural monopoly in these European countries? Explain and justify your answer and use appropriate examples to support your conclusions.

Next, consider the case of several large, established pharmaceutical manufacturers such as Merck. What type of market form do you believe that such manufacturers operate under? Jjustify your answers and use appropriate examples to support your conclusions.

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By the due date assigned, post your initial response in the Discussion Area below. Through the end of the module, read all of the other students’ submissions, and post substantive comments to at least two classmates.
Grading Criteria

Assignment 1 Market Structures

Maximum Points

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Market Structures

Higher Education Sector

It is improper to classify higher education as a natural monopoly in Europe. Natural monopoly arises in a market where there are barriers to entry such as high initial capital. Monopolies tend to offer same identical products with no substitutes. They can also emerge in sectors that require unique technology, raw materials or other similar factors. However, different universities offer different courses and admit students with varying academic qualifications. Higher education facilities in Europe do not offer identical programs nor do they require unique technology or raw materials to operate.  As such, these facilities do not qualify as natural monopolies. The banning of some private universities only leads to reduced competition in the industry (Haug, 2003).

Pharmaceutical Manufacturing Sector The several large and established pharmaceutical manufacturers such as Merck & Co, Pfizer, GlaxoSmithKline, and Johnson & Johnson operate under oligopoly market structure. Some of the oligopolistic characteristics associated with this industry include few dominant firms and substantial barriers to entry. First of all, the pharmaceutical sector has several barriers to entry in terms of legal restrictions and cost structure. For example, government patent gives the original innovator of a certain drug at least 20 years to supply the product without competition. The argument, in this case, is that a patent is important to safeguard the economic gains of the innovating entity. On the same note, brand loyalty advantage gives the several established pharmaceutical manufacturers an upper hand in the industry. By being innovators of several drugs, these firms easily acquire the first-mover advantage because the effectiveness and quality of substitute generic drugs is usu


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