2.7. Market Structures

Question 1

Types of Market Structures

Answer 1

1) Perfect competition: many small firms, no market power, identical products.
2) Monopolistic competition: many small firms, some market power, similar products.
3) Oligopoly: small number of large firms, substantial market power, identical or differentiated products.
4) Monopoly: one large firm, complete market power, unique product.

Question 2

Market Structures with Imperfect competition

Answer 2

all except perfect competition

Question 3

Comparing Market Structures (BBINNP)

Answer 3

1) Number / size of firms
2) Barriers to entry / exit
3) Nature of Product
4) Behaviour of Firms
5) Influence over prices
6) Profits

Question 4

Number / size of firms (Comparing Market Structures)

Answer 4

• Market concentration

- Concentration ratios

Question 5

Barriers to entry / exit (Comparing Market Structures)

Answer 5

• Start-up / capital costs
• Sunk costs
• Economies of scale
• Legal barriers
• Branding
• Natural advantages
• Anti-competitive pricing
• Breaking contracts
• Cost of worker redundancy

Question 6

Nature of Product (Comparing Market Structures)

Answer 6

• Homogeneous (identical)
• Differentiated / branded
• Unique

Question 7

Behaviour of Firms (Comparing Market Structures)

Answer 7

• Independent

- Interdependent

Question 8

Influence over prices (Comparing Market Structures)

Answer 8

• Price taker

- Price maker

Question 9

Profits (Comparing Market Structures)

Answer 9

• Normal
• Abnormal
• Subnormal

Question 10

Firm

Answer 10

the individual business

Question 11

Industry

Answer 11

a group of firms selling similar / identical products.