Market Structures Flashcards
Main objective of firms in perfect competition
profit maximisation
define perfect competition
many buyers and sellers with no market power
what type of product is in a perfectly competitive market
homogenous
In a perfectly competitive market firms are
price takers
in a perfectly Competitive market there are ______ barriers to entry exit
no
perfectly competitive Markets produce what type of efficiency in the long run equilibrium
allocative
In the short run perfectly competitive markets produce what kind of profit
SNP
What kind of efficiency do perfectly competitive markets not create
dynamic efficiency
what kind of demand curve is on the perfect competition diagram
perfectly elastic
define oligopoly
Few sellers all taking into account each other’s behaviour
How many firms are in an oligopoly
few large
In an oligopoly firms are price
makers
In an oligopoly there are _____ barriers to entry
high
What kind of decision-making occurs in oligopolies
interdependent
Why are oligopolies better than monopolies
more consumer choice
lower price
What kind of efficiency occurs in oligopolies
dynamic
collusive oligopolies are _____ inefficient
economically
Define natural monopoly
Monopoly that arises because there are such substantial fixed costs/economies of scale that only one firm is viable
being a natural monopoly is the most ______ ________ metic to overcome the massive fixed costs
productively efficient
in a natural monopoly which 2 efficiencies can be achieved
productive and allocative
what is a drawback of natural monopoly
lack of consumer choice
lack of competition threat can lead to high prices
define monopolistic competition
A market that shares some characteristics of monopoly and some of perfect competition
what are the 3 characteristics of monopolistic competition
Large number of firms
No/very low barriers to entry
Product differentiation
3 advantages of monopolistic competition
completion lowers prices for consumers
lower x-inefficiency
greater equality
what are the disadvantages of monopolistic competition
no economic efficiency
advertising spending is wasteful
no dynamic efficiency
what is a limitation of using monopolistic competition
assumptions are unrealistic
depends on the nature of the market, type of product
