9.1 Market Structure and Firm Behaviour

Question 1

define market power

Answer 1

Firms have market power
when they can influence the price of their product.

Question 2

define market structure

Answer 2

Market structure refers to all the features of a market that affect the behaviour and performance of firms in that market, such as the number and size of sellers, the extent of knowledge about one another’s actions, the degree of freedom of entry, and the degree of product differentiation.

Question 3

define a competitive market

Answer 3

A market is said to be competitive when its firms have little or no market power. When firms are price takers.

Question 4

define Competitive Behaviour

Answer 4

The term competitive behaviour refers to the degree to which individual firms actively compete with one another for business. ex: MasterCard and Visa engage in competitive behaviour but their market is not competitive vs 2 wheat farmers do not engage in competitive behaviour but they both exist in a very competitive market