MARKET STRUCTURE AND MARKET FAILURE Flashcards
market structure
market classification according to characteristics of the firms in the market
markets structures
- Perfect competition
- Monopolistic competition
- Oligopoly
- Monopoly
perfect competition
a state of immense competition, where the market is large, suppliers are many and equilibrium price is agreed on as the price of the product
characteristics of perfect competition
- many buyers and sellers
- homogeneous products - impossible for consumers to tell the difference between goods from different businesses
- freedom of entry and exit from industry
- perfect knowledge
- each business is a price taker
monopolistic competition
there are a large number of sellers with no restrictions preventing new firms from entering the market
characteristics of monopolistic competition
- many buyers and many sellers
- differentiated products - it is possible for consumers to tell the difference between goods from different businesses
- freedom of entry and exit from industry
- good knowledge
oligopoly
exists where there are a few large producers who supply a particular market
characteristics of oligopoly
- only a few sellers in the market
- producta can be either differentiated (soda) or undifferentiated (electricity)
- usually very expensive and difficult to enter the market
- consumers do not have perfect knowledge about prices or products
monopoly
the market structure with no competition and a single firm that produces al goods for the market
characteristics of monopoly
- only one firm dominated the market
- high barriers to entry
- product is unique
- products are often protected by patents or heavy branding
- the monopolist is the price maker
patent
a legal right given to a designer or inventor to be the only producer of the product
