20. Market Structure

Question 1

What is Market Structure?

Answer 1

The characteristics of the market.

Question 2

What are the characteristics of a Market?

Answer 2

How many firms compete for the amount of competition, the amount of collusion between them, the extent of product differentiation and how easy is it for new firms to enter the market to compete.

Question 3

What does competition encourage?

Answer 3

The best use of scarce resources

Question 4

What is Perfect Competition?

Answer 4

This is a market situation where no firm or individual is able to influence the working of the market.
Firms are small in size and exist in large numbers
Each firm produces perfect substitutes
Each firm faces elastic demand

Question 5

What is Imperfect Competition?

Answer 5

The situation in a market in which elements of monopoly allow individual producers or consumers to exercise some control over market prices.

Question 6

What is a Monopolistic Market Structure?

Answer 6

A market structure that has a large number of firms selling goods and services which are close substitutes to competitors
It has weak barriers to entry
Competition is strong

Question 7

What is an Oligopoly?

Answer 7

An oligopoly is a market structure which has a small number of firms which produce goods or services that are close substitutes and are usually large in scale.
They have strong barriers to entry due to the costs
They are price makers

Question 8

What is Duopoly?

Answer 8

2 producers of a good or service

Question 9

What is a Monopoly?

Answer 9

A monopoly is a single seller of a good or service for which there are no or very, very few substitutes.
They are price makers

Question 10

How does a Monopoly impact supply?

Answer 10

It reduces supply and increases prices, causing a shift in the supply graph to the left

Question 11

What are the disadvantages of a Monopoly?

Answer 11

Less consumer choice
Poor product quality as there is no competition
Inefficiency

Question 12

What are the 2 types of barriers to entry?

Answer 12

Natural or Artificial

Question 13

What are some Natural barriers to entry? (4)

Answer 13

Economies of Scale
Capital Size
Legal considerations
History

Question 14

What are some Artificial barriers to supply?

Answer 14

Restrictions on supplies
Predatory pricing
Exclusive dealing

Question 15

What are Economies of Scale?

Answer 15

Average costs reducing as your firm gets bigger

Question 16

What is Predatory Pricing?

Answer 16

When one business offers low-cost products, even at a loss, in order to force out the competition.

Question 17

What is Exclusive dealing?

Answer 17

When a monopoly business would have an agreement to prevent retailers from stocking rivals

Question 18

What is a Monopsony?

Answer 18

A single buyer of a commodity or service