Imperfect Competition Flashcards
Imperfect perfect meaning
Imperfect competition occurs when companies sell different products and services, set their own individual prices, fight for market share, and are often protected by barriers to entry and exit.
What is monopoly in imperfect competition
The most imperfect form of competition is monopoly
Characteristics of Imperfect competition- fewer market participants
Unlike perfect competition, imperfectly competitive markets have fewer buyers and sellers, with some participants holding a significant market share.
Characteristics of Imperfect competition- productive differentiation
Firms often differentiate their products through branding, packaging, features or other unique selling points to gain a competitive edge
Characteristics of Imperfect competition- Barriers to entry and exit
Have barriers that prevent new firms from easily entering the market or discourage existing firms from exiting. E.g. legal restrictions, patents, high set up costs, or economies of scale.
Characteristics of Imperfect competition- Market Power
Individual firms have some degree of control over the market price and can influence it to their advantage. This allows them to earn profits by setting prices higher than marginal cost of production.
What 3 markets do imperfect competition fall within
Monopolistic competition
Oligopoly competition
Monopoly competition
What are the four maker powers of firms
Perfect competition
Monopolistic competition
Oligopoly competition
Monopoly competition
Perfect competition definition simplified
Many firms with a homogeneous product
Monopolistic competition definition simplified
Many products with differentiating products
Oligopoly competition definition simplified
A few producers with high market power
Monopoly competition definition simplified
A single producers without substitutes
What can imperfect competition not do
Imperfect competition cannot sell at any given quantity it wants at the going/ current rate as raising the price reduces the demand.
What can be said about marginal revenue and average revenue
MR < AR
What is a firm that has market power
A firm who has market power is a price-setter, they can also use price discrimination. This is when the same good is sold to different customers at different prices.
