Economics: Market Structures Overview

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Questions and Answers

Which of the following is NOT a characteristic of a monopolistic competitive market?

Product differentiation
Significant barriers to entry (correct)
Many firms
Some control over price

In a perfect competitive market, firms can make long-term economic profits.

False (B)

What is the primary behavior of a perfect competitive firm in the short run?

Maximize profit by producing where marginal cost equals marginal revenue.

In a monopoly, the firm has _ to set prices due to the lack of competition.

<p>market power</p> Signup and view all the answers

Match the market structure with its characteristic:

<p>Perfect Competition = Many buyers and sellers, homogeneous products Monopoly = Single seller, significant barriers to entry Monopolistic Competition = Many firms, product differentiation Oligopoly = Few firms with interdependent pricing</p> Signup and view all the answers

Flashcards

Perfect Competition

A market structure where many firms sell identical products, no single firm can influence price, and there are no barriers to entry or exit.

Monopoly

A market structure where a single firm controls the entire market for a unique product with no close substitutes, setting the price and having high barriers to entry.

Monopolistic Competition

A market structure where many firms sell differentiated products, each having some control over its price, and relatively low barriers to entry.

Oligopoly

A market structure with a few large firms dominating the market, often selling similar products, but having limited price control due to mutual interdependence.

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Excess Capacity

Firms operate in this market structure when they produce less than the output that minimizes their average total cost, leading to inefficiencies and higher prices.

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Study Notes

Perfect Competition

Characteristics of a perfect competitive market
Characteristics of a monopoly
Characteristics of monopolistic competition
Characteristics of an oligopoly
Differentiating between monopolistic competition and oligopoly
Perfect competitive firm behavior in the short run
Firm's decision to shut down if incurring losses in the short run
Perfect competitive firm behavior in the long run
Short-run vs. long-run supply curve for a perfectly competitive firm
Difference between monopolist and perfect competitor behavior (short run, economic profits)
Difference between monopolistic competitor and perfect competitor behavior (short run, economic profit)
Difference between monopolistic competitor and perfect competitor behavior (long run, excess capacity)
Comparing consumer surplus in perfect competition and monopoly
Collusive oligopoly concept