9. Forms of Market

Question 1

What is a market structure?

Answer 1

A Market Structure refers to the types of markets in which the producers or the firms operate.

Question 2

Define Perfect Competition market structure.

Answer 2

It is a market structure in which there are a large number of producers (firms) producing a homogenous product so that no individual firm can influence the price of the commodity.

Question 3

Is a firm under perfect Competition a price-taker or a price-maker?

Answer 3

It is a Price-Taker.

Question 4

State the features of Perfect Competition.

Answer 4

1. Large number of buyers and sellers.
2. Homogenous Product.
3. Freedom of entry and exit.
4. Perfect mobility of resources.
5. Perfect Knowledge.
6. Absence of Transport Costs.

Question 5

Define a Monopoly market structure.

Answer 5

A market structure in which there exists only a single or a sole producer of a product, that has no close substitutes.

Question 6

State the features of Monopoly market structure.

Answer 6

1. Single Seller
2. Absence of a close substitute.
3. Closed Entry.
4. Price-Maker.
5. Possibility of Price Discrimination.

Question 7

What is Price Discrimination?

Answer 7

Refers to a situation when a producer sells the same product to different buyers at two or more different prices for reasons not associated with difference in the cost of supplying the product to different consumers.

Question 8

Define Monopolistic Competition.

Answer 8

A form of market in which there are a large number of sellers of a particular product, with each seller selling somehwat differentiated but close substitutes to the product sold by other sellers.

Question 9

State the features of Monopolistic Competition.

Answer 9

1. Large number of buyers and sellers.
2. Differentiated Products.
3. Free Entry and Exit.
4. Selling Cost.
5. Non-Price Competition.
6. Independent Price Policy.

Question 10

Define Oligopoly market structure.

Answer 10

A form of market structure in wich there are a few firms selling a product so that there is intense competition among them.

Question 11

State the features of Oligopolistic Competition.

Answer 11

1. Intense Competition.
2. Interdependence.
3. Nature of the product.
4. Importance of Selling Cost.
5. Barrier to Entry.
6. Indeterminate Demand Curve of an Oligopolist.

Question 12

Define Monopsony market structure.

Answer 12

A situation where there is a single buyer of the product who is not in competition with other buyers for the product which it purchases, and in which the entry into the market by other buyers is impossible.

Question 13

State the features of Monopsony.

Answer 13

1. Single Buyer.
2. Large number of sellers.
3. Specialised Product or Input
4. Lack of Mobility.
5. Price - Maker.