Introduction Microeconomics is a subset of economics dealing with the individual elements in the economy and how they interact to achieve their own economic goals. There are various individual units in the economy that are examined. The main two are the household and the business units. We can also examine the government, though this would normally border on the macroeconomics side (Campbell, 2004). In examining the car industry, we should examine how the car industry affects the individual units: namely the firm and the household, and put into consideration recent events and phenomena noted within the international car industry that are applicable Market structure of the industry The car industry takes has been under debate as to the market structure type it adopts. This is because it resembles two market structures: oligopoly and monopolistic competition. Oligopoly has a few sellers competing with each other with similar goods and services. The monopolistic competition also has a few sellers selling similar goods and services. Their products are highly differentiated so as to attract customers. While one might argue that the car industry is a monopolistic competition due to the differentiation experienced, others think otherwise. As pointed out in The Shortrun (n.d.), the industry is an oligopoly due to the influence these firms exert over the market. They can, for example, withhold supply, a trend within the luxury goods market. Oligopolies also experience barriers to entry. These barriers as noted by Campbell include price barriers due to the capital-intensive nature of the business (Campbell, 217-234, 2004). The characteristics of the oligopoly market are seen extensively in the arrangement and format of the car industry. For example, there is mutual interdependence on the level of pricing. Therefore the pricing of one firm determines the pricing strategy of its rivals. If one firm decreases the price, the other firms will rush to decrease their prices in response. If the firm increases its price, there will be no increase in the prices of other competitors (the short run). This has been seen in the price wars that have characterized the car industry. Loveday notes, in the recently created car segment, hybrid cars, Toyota has led the charge to slash their prices. Toyota has continuously lowered the prices of its hybrid model, the Toyota Prius, in a bid to take out the Honda version, the Honda Insight. The decrease in price by one car maker led to the subsequent reduction in price by the rival (Loveday, 2009). Another characteristic of oligopoly is the collusion of two sellers in a bid to use their new strength against one seller. The new synergy created in terms of capital, market connections, and technology puts them at a better level against the rival (the Shortrun). The main victim of such gang-ups has been Toyota. The recent mergers of Daimler-Benz taking over Chrysler is an example of how firms merge to survive. The superior network and synergy created was an advantage that allowed the firm to survive (Economics help, 008). In the shortrun, it is cited that oligopoly, though, economic efficiency is not reached. This is because of allocation and production inefficiencies.