Market structures defintions

Question 1

What is a Pure/Perfect Monopoly?

Answer 1

1. One seller controls the output of the industry and there is no close substitute
2. No competition in a pure monopoly markets because there is no rival sellers.
3. Entry and Exit are difficult due to high start up cost.

Question 2

What is an Oligopoly?

Answer 2

Relative few but large sellers (Usually up to around 8 or 10 sellers) control the industry with some potential for collusion and abuse of market power.

Question 3

What is Monopolistic competition

Answer 3

1. A moderate number of sellers between (20-40 possibly could be more) each selling similar but not identical products to satisfy the same kind of want.
2. Strong competition

Question 4

What is pure or perfect competition?

Answer 4

1. Many buyers and sellers in the industry (between hundreds and thousands)
2. Very strong competition
3. Firms are price takers with little market power to set their prices.