Market Structure

Question 1

Factor that determine market structure

Answer 1

-number of firm + size
- degree of product differentiation
- bargaining power of firm to set price
- barriers to entry/exit the industry
- degree of non price competition

Question 2

Perfect competition

Answer 2

Price takers that take the equilibrium market price

La demande fix les prix sur le marché

Question 3

Characteristics perfect competition

Answer 3

• large number of firm
• Identical product
• Each firm is small relative to total market
• perfect elastic demand curve
• supply and demand determine market price

Question 4

Équilibre long run

Answer 4

Market: D = S
Firm: p=mr=mc=atc

Question 5

Monopoly characteristic

Answer 5

• firm faces downwards sloping demand curve
• firm has the power to set price
• high barriers to entry
• control over a resource needed to produce the product
• supported by gvt regulation or specific laws

Question 6

But d’un monopole

Answer 6

Faire le plus de profit possible, PAS vente le + cher. Se créer au croisement de la courbe mc = mr

Question 7

Calcul marginal and average revenu

Answer 7

TR = p x q
MR = delta TR/delta Q
AR = TR

Market price = MR = AR

Question 8

Characteristic monopolistic competition

Answer 8

-product are differentiated
- large number of firms in industry
- low barriers to entry
- each firm has a market share
- collusion no possible
- relatively elastic demand, downward sloping
- firms compete on price, quality, marketing
- brand name, product innovation, marketing advertising

Question 9

Oligopoly characteristics

Answer 9

• few firms in industry
• interdépendance: choix et décision d’une cie vont avoir un impact sur les choix et décisions des autres vies p/r à leur demander profit et prix
• product may be similar
• product may be differentiated
• product are often good substitutes for each other
  -significant barriers to entry

Question 10

Collusion. Vs perfect competition

Answer 10

Interdépendant décisions in oligopoly markets determine profit

Many possible outcomes range between:

Perfect collusion to maximize total profit

Perfect competition for zero economic profits

Question 11

N-firm concentration ratio

Answer 11

Sum % market shares de N largest firm in an industry

Market share = firms sales/total market sales

Lower ration = competitive market
Higher ratio= oligopoly

Désavantage: ignore barriers to entry, épargné par les fusions

Question 12

Herfindahl-hirschman index (HHI)

Answer 12

Sum of squared market share of N largest firm in the market

0,1 a 0,18 = moderately competitive
0,18+ = uncompetitive market

:) = more sensitive to mergers than n-firm ratio, widely used by regulators

:( = ignores barriers to entry, ignore demand elasticity

Question 13

HHI example

Answer 13

4 firm HHI: 0,25 ^2 + 0,15^2 + 0,15^2 + 0,1^2 = 0,1175