4.1.5.1 Market structures (Paper 1)

Question 1

Spectrum of competition

Answer 1

Perfect comp. - mono comp. - oligopoly - pure monopoly

Question 2

Perfect competition - characteristics

Answer 2

1. Homogenous products
2. No/low barriers to entry/exit
3. Large number of firms
   - Perfect information
   - Profit max

Price takers - no price setting power

Question 3

Examples of industries close to perfect competition

Answer 3

• Foreign exchange markets

- Petrol stations

Question 4

Monopolistic competition - characteristics

Answer 4

1. Slightly differentiated products
2. Low barriers to entry/exit
3. Large number of firms
   - Good information
   - Profit max

Price makers - price elastic demand

Question 5

Examples of monopolistically competitive markets

Answer 5

• Restaurants
• Hair salons
• Clothing

Question 6

Oligopoly - characteristics

Answer 6

1. Differentiated products
2. High barriers to entry/exit
3. A few firms in the market
   - Profit max not the sole objective

INTERDEPENDENCY

Question 7

Examples of oligopolistic markets

Answer 7

• Super-market industry

- Cellular networks

Question 8

Pure monopoly - characteristics

Answer 8

1. One firm dominating the market
2. Differentiated products
3. High barriers to entry/exit
   - Imperfect competition

Question 9

Examples of monopolistic markets

Answer 9

• Search engines
• Public utilities

No such thing as a ‘pure’ monopoly - legal monopoly is over 25%