Market Structures

Question 1

Give 6 assumptions for perfect competition

Answer 1

Many buyers and sellers, firms are price takers, homogenous products, no barriers to entry or exit, perfect info (e.g. no firms have advantages in production processes or cheap suppliers), all firms aim to profit maximise

Question 2

Give 5 assumptions of a pure monopoly

Answer 2

One seller and many buys, firm is a price maker, absolute barriers to entry and exit, asymmetric information, limited product only available from one firm

Question 3

What is the assumption for a working monopoly?

Answer 3

One firm has over 25% of market share

Question 4

Give 3 assumptions of monopolistic competition

Answer 4

Many buyers and sellers, slightly differentiated products (meaning some price making powers), low barriers to entry and exit

Question 5

Give 5 assumptions of an oligopoly

Answer 5

Few firms dominate the market and many buyers, some price making powers, high barriers to entry and exit, firms are interdependent (actions of one firm depend on actions of others), concentration ratio across top four firms 60%+