market structures Flashcards
1
Q
what are market structures?
A
Refers to characteristics within a market that influence the way a firm behaves
2
Q
assumptions and characteristics of perfect competition
A
- homogenous products
- all firms have access to factors of production
- perfectly elastic demand
- large number of buyers and sellers
- perfect knowledge/ info for buyers and sellers
- free entry into and exit from the market
- price takers - firms cannot dictate market price
3
Q
does allocative efficiency occur in a perfectly competitive market
A
- occurs in both short run and long run and price=MC
4
Q
does productive efficiency occur in perfect competition
A
occurs in long run when firm is producing at the lowest point of it’s AC curve
5
Q
does dynamic efficiency occur in perfect competition
A
As this type of market produce homogenous products , there is little scope for innovation
6
Q
evaluation of assumptions in perfect competition market model
A
- most firms have some amount of price -setting power
- it is rare for entry and exit in an industry to be costless (e.g. start up costs)
- for highly complex products there are always information gaps
7
Q
A
