Types of markets

Question 1

Monolpoly

Answer 1

A single firm controls the output of an industry for which there is no substitute product. The firm can set prices. They are called price makers.

Question 2

Oligopoly

Answer 2

An oligopoly exists when several large firms, possibly 5–10, control most of an industry. Here, selling often depends on brand names and there is the potential for rival producers to secretly collude in an attempt to limit competition and fix prices.

Question 3

Monopolistic competition

Answer 3

Monopolistic competition involves 20 or more firms, operating in a single industry to produce a particular product. However, each firm uses its unique brand name and different product features to sell its items. Products are similar but not identical, giving firms some market power when setting their price.

Question 4

Perfect competition

Answer 4

Here, there is strong rivalry between perhaps hundreds or thousands of firms selling an identical product. Individual producers are therefore unable to set their own prices and have little or no market power. They are called price takers.