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Which of the following are considered the 4 Basic Market Structures? (Select all that apply)
Which of the following are considered the 4 Basic Market Structures? (Select all that apply)
- Perfect Competition (correct)
- Monopolistic Competition (correct)
- Oligopoly (correct)
- Duopoly
- Pure Monopoly (correct)
What are the characteristics of Perfect Competition?
What are the characteristics of Perfect Competition?
Many firms, standardized product, low entry and exit barriers, price takers, no non-price competition, assumes many buyers, example: agricultural goods.
What defines Monopolistic Competition?
What defines Monopolistic Competition?
Many firms, differentiated product, easy entry and exit barriers, some price control, lots of advertising, usually close substitutes, examples: retail trade, music, shoes.
What are the key characteristics of Oligopoly?
What are the key characteristics of Oligopoly?
What are the characteristics of Pure Monopoly?
What are the characteristics of Pure Monopoly?
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Study Notes
Basic Market Structures
- Categories: Perfect Competition, Monopolistic Competition, Oligopoly, Pure Monopoly.
Perfect Competition
- Characterized by many firms in the market.
- Products are standardized; consumers view them as identical.
- Low barriers to entry and exit, allowing easy market participation.
- Firms are price takers, having no influence over market prices.
- No emphasis on non-price competition; competition is based on price alone.
- Typically assumes a large number of buyers.
- Common example: Agricultural goods (e.g., wheat, corn).
Monopolistic Competition
- Comprises many firms offering products that are differentiated.
- Products are similar but not identical; close substitutes available.
- Easy entry and exit, fostering competitive market conditions.
- Some degree of price control; firms can slightly influence prices.
- Extensive use of advertising as a form of non-price competition.
- Industries often include retail trade, music, and footwear.
Oligopoly
- Market consists of a small number of firms, leading to interdependent actions.
- Firms may offer either standard or differentiated products.
- High barriers to entry, restricting new competitors.
- Limited price control exists; firms may engage in strategic behavior.
- Significant investment in advertising as a form of non-price competition.
- Usually involves products with close substitutes.
- Examples include the automobile industry, gasoline, appliances, and steel.
Pure Monopoly
- Dominated by a single firm with a substantial market share.
- May offer either standard or differentiated products, but uniqueness is key.
- Barriers to entry are extremely high, preventing competition.
- Firm has considerable control over market prices, acting as a price maker.
- Lacks non-price competition; minimal advertising except for public relations.
- Unique product with no close substitutes, ensuring monopolistic power.
- Typical example: Electric distribution companies.
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