16 Questions
What is market structure?
Market structure refers to the characteristics of the market that describes the nature of competition and the pricing policy followed in the market.
What are the two kinds of market based on competition?
The two kinds of market based on competition are perfect competition and imperfect competition.
What is imperfect competition?
Imperfect competition is a situation where elements of monopoly allow individual producers or consumers to exercise some control over market prices.
What is perfect competition?
Perfect competition is a situation where buyers and sellers are numerous and well informed, with no elements of monopoly, and the market price is beyond the control of individual buyers and sellers.
What are the characteristics of perfect competition?
The characteristics of perfect competition include free entry and exit to the industry, homogenous product, large number of buyers and sellers, and sellers being price takers.
What are the different market structures under imperfect competition?
The different market structures under imperfect competition are monopolistic competition, monopoly, oligopoly, and duopoly.
What are some examples of markets that exhibit perfect competition?
Financial markets (e.g. stock exchange, currency markets, bond markets) and agriculture.
What happens to the price and supply in a competitive environment when a firm makes short term abnormal profit?
Supply increases and price falls.
What are the advantages of perfect competition?
High degree of competition helps allocate resources to most efficient use, firms operate at maximum efficiency, normal profit is made in the long run, and consumers benefit.
What are some examples of industries characterized by oligopolistic structures?
Supermarkets, banking industry, etc.
What are the characteristics of monopolistic competition?
Many buyers and sellers, products differentiated/product variation, relatively free entry and exit, each firm may have a tiny 'monopoly' because of product differentiation, firm has some control over price, heavy expenditures on advertisement.
What are the barriers to entry in oligopoly?
High capital cost, product differentiation and brand loyalty, ownership/control of key factors or outlets, institutional barriers, patents, regulations.
What is meant by the concentration ratio in measuring oligopoly?
It is the proportion of market share accounted for by the top X number of firms.
What are the characteristics of a duopoly market?
Market consists of two producers, producers have high strategic dependence, possibility of price leader emerging, monopoly power is significant, entry barriers are high, economies of scale are high, and abnormal profits are possible.
What are the characteristics of a monopoly market in terms of pricing and profits?
The seller is a price maker, there are high barriers to entry, the firm controls price or output/supply, abnormal profits are possible in the long run, and price discrimination is possible.
What is the main characteristic of a monopoly market?
It is characterized by a single seller, selling a unique product in the market, with no close substitutes.
Test your understanding of market structures and competitive environments in entrepreneurship. Learn about perfect competition and imperfect competition and how they affect pricing policies.
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