Market structures

Question 1

Market structures

Answer 1

How different industries are classified and differentiated based on their degree and nature of competition for goods and services

Question 2

Most common market structures

Answer 2

Perfect competition
Monopoly
Oligopoly
Monopolistic competition

Question 3

Homogenous

Answer 3

Same good, perfect substitutes

Question 4

Factors influencing market structures

Answer 4

Number of firms
Type of goods
Barriers to entry
Barriers to exit

Question 5

Number of firms

Answer 5

There may be a few or many firms

Question 6

Type of goods

Answer 6

Goods in a market can be similar (but still different) or homogenous

Question 7

Barriers to entry

Answer 7

Obstacles blocking/preventing a new firm from entering the market. Strong branding of existing firms (products are well known so new entrants are at a disadvantage)

Question 8

Types of barriers to entry

Answer 8

Strong branding of existing firms (products are well known so new entrants are at a disadvantage)
Capital intensive markets e.g. aeroplane(need large capital reserves so smaller firms cant compete)
Highly regulated markets (many laws and rules to adhere to)

Question 9

Barriers to exit

Answer 9

Obstacles blocking/preventing a firm from leaving a market

Question 10

Types of barriers to exit

Answer 10

Specialised skills (very specialised so difficult to switch to another market or industry)
High sunk costs (cant recover these if they move)