Topic 4 - Market Structures

Question 1

What determines the market structure?

Answer 1

• How easy is is to enter or leave the market
• The number of buyers and sellers
• The types of goods and services sold
• How price is determined

Question 2

Describe a monopoly

Answer 2

• One seller, many buyers
• Difficult for firms to enter
• One product
• Firm is the price setter
• Eg, water company

Question 3

Describe a oligopoly

Answer 3

• Few sellers, large number of buyers
• Restrictions to entry
• Goods can be differentiated or homogenous
• Firms are price setters
• Eg electrical appliances

Question 4

Describe a monopolistic competition

Answer 4

• Large number of buyers, many sellers
• Easy access to the market
• Goods are similar but differentiated
• Firms are price setters
• Eg restaurants

Question 5

Describe perfect competition

Answer 5

• Many buyers, Many sellers
• Free entry to the market
• Goods are homogenous
• Firms are price takers
• Eg carrots