B2.01.01: Perfect and Imperfect Competition

Question 1

Describe the key characteristics of perfect competition.

Answer 1

Perfect competition entails Many firms, identical products, easy market entry/exit, perfect information.

Question 2

What defines a monopoly, and what barriers can contribute to its existence?

Answer 2

Single dominant firm, high entry barriers (e.g., economies of scale, brand loyalty, high start-up costs etc)

Question 3

Explain the nature of an oligopoly and why competition is intense among the few firms in this market structure.

Answer 3

Few large firms, high barriers, intense inter-firm competition.

Question 4

What distinguishes monopolistic competition from other market structures, and how do firms differentiate themselves?

Answer 4

Many firms, differentiated products, branding, advertising, some market power.

Question 5

Examples of 3 goods that are commonly available in perfect competition?

Answer 5

• Milk
• Crude Oil
• Sugar