4.1 Market structures Flashcards
What is a market structure?
A market structure is usually defined by the number of firms in the market and their size.
This then leads to other aspects such as how the firms behave, conduct themselves and ultimately compete with one another.
What is perfect competition?
In perfect competition there are a large number of producers in the market and no barriers to entering the market exist. Selling homogenous goods.
What is market share?
Market share is the percentage of total sales or total output that a business has in a specified market.
Define monopoly.
One firm dominates the entire market (pure monopoly)
How many types of market structure are there and what are they?
5
Monopoly, duopoly, oligopoly, monopolistic competition, perfect competition
Define duopoly.
A duopoly exists where there are only two firms in the market
Like monopolies, duopolies can also exploit consumers by charging high prices
Define oligopoly.
Oligopoly occurs when a few firms dominate the market
Define monopolistic competition.
Monopolistic competition occurs when there are many firms in the market but there is some form of product differentiation
What is imperfect competition?
We use this term to cover all the market structures apart from perfect competition
There are lots of sellers but they are selling heterogeneous (dissimilar) goods, as opposed to the homogeneous goods in perfectly competitive markets
What are barriers to entry/exit?
Considers how easy it is for firms to stop selling one product and start selling another
Perfect competition - no barriers
Monopoly - high barriers
What is a price taker?
Accepts the market price and has no control over the market price
What is a price maker?
Has the power the set the market price
In the short run why might people say barriers to entry/exit are higher?
The cost of start up and the chance of a new firm going into a market not surviving
