different markets brief overveiw Flashcards
what are the 7 market structures
perfect competition
monopoly
monopsony
monopolistic competition
oligopoly
contestable market
collusive oligopoly
what are 6 features of perfectly competitive markets
Many firms.
Freedom of entry and exit; this will require low sunk costs.
All firms produce an identical or homogeneous product.
All firms are price takers, therefore the firm’s demand curve is perfectly elastic.
There is perfect information and knowledge.
They don’t have price setting abilities
what is a monopoly- brief overview
One firm dominates the market, barriers to entry, possibly supernormal profit.A pure monopoly is defined as a single seller of a product, i.e. 100% of market share.
In the UK a firm is said to have monopoly power if it has more than 25% of the market share.
what is a monopsony
A monopsony occurs when a firm has market power in employing factors of production (e.g. labour).
A monopsony means there is one buyer and many sellers.
a monopsony employer – has market power in hiring workers.
This is a similar concept to monopoly where there is one seller and many buyers.
what is the difference between monopoly and monopsony
In a monopoly, a single seller controls or dominates the supply of goods and services. In a monopsony, a single buyer controls or dominates the demand for goods and services.
what is an oligopoly
An oligopoly is an industry dominated by a few large firms. For example, an industry with a five-firm concentration ratio of greater than 50% is considered an oligopoly.
what is monopolistic competition-overveiw
Freedom of entry and exit, but firms have differentiated products. Likelihood of normal profits in the long term.
what is a contestable market
– An industry with freedom of entry and exit, low sunk costs. The theory of contestability suggests the number of firms is not so important, but the threat of competition.
