49) Market structure

Question 1

What factors determine the market structure in an industry & what affect do they have on market structure?

Answer 1

1) Number and relative size of firms in the market
2) Barriers to entry and exit
3) Product homogeneity and branding
4) Knowledge (producers and consumers)
5) Interdependence

Question 2

How do firms compete against each other?

Answer 2

1) Price
2) Quality
3) After-sales service
4) Delivery date
5) Brand/image

Question 3

What are barriers to entry?

Answer 3

Factors which make it difficult or impossible for firms to enter an industry and compete with existing producers

Question 4

What are barriers to exit?

Answer 4

Factors which make it difficult or impossible for firms to cease production and leave an industry

Question 5

What are homogenous products?

Answer 5

Goods made by different firms but which are identical

Question 6

What is a natural monopoly?

Answer 6

Where economies of scale are so large relative to market demand that the dominant producer in the industry will always enjoy lower costs of production than any other competitor