Market Structures Flashcards
Perfect Competition, Oligopoly, Monopoly, Monopolistic Competition
Define Market Structure
A market structure is defined as the features that determine the behaviour and performance of firms in the industry
Define Perfect Competition
Perfect Competition is a market structure in which there are many sellers and many buyers producing a homogeneous product
Define Monopoly
A monopoly is a market in which there is only one seller and many buyers
Define Monopolistic Competition
Monopolistic Competition is a market structure in which there is no competition amongst many firms.
Define Oligopoly
An oligopoly is a market structure in which there are a few firms competing in the market
Define Price Rigidity
Price remains at a certain level over a long period
Define Price War
A price war is when rival firms continuously try to undercut each other
Define Collusion
Collusion occurs when there are price and quantity agreements with other firms
Define Cartel
Cartel is a group of sellers colluding
How does a Monopoly maximize profit?
A monopoly maximizes profit by producing output when MR = MC
How does Monopolistic Competition maximize profit?
Profit is maximized by producing output when MC = MR.
How does Perfect Competition maximize profit?
If MR = MC, economic profit is maximized.
What are the features of Perfect Competition?
In perfect competition there are many sellers and buyers, the product is homogeneous and there is perfect knowledge in the market.
The firm is a price-taker and there is freedom of entry into the industry.
What are the features of a Monopoly?
A monopoly has one seller and many buyers, the product is unique and there is imperfect knowledge in the market.
The firm is a price maker and there a high barriers to entry.
What are the features of Monopolistic Competition?
In monopolistic competition, there are many sellers and many buyers, the product is similar yet differentiated and there is imperfect knowledge in the market.
The firm is a price maker and there might be low barriers to entry.
