Market Structures Overview

Buyers and sellers act independently, influencing prices based on supply and demand.

In a perfectly competitive market, neither buyers nor sellers band together to influence prices.

Buyers and sellers in a perfectly competitive market have sufficient information to make informed decisions - comparing prices and understanding competitor pricing.

Both buyers and sellers can freely enter or exit the market without barriers.

In a perfectly competitive market, the price of a good or service is determined by supply and demand.

No single buyer or seller has enough power to control the market price.

A perfectly competitive market has many buyers and sellers, each with a small market share, so no single participant can influence the price.

The price of a homogeneous product, that is, one that is identical across suppliers, is set in a perfectly competitive market.

A market situation where only one firm is the most efficient producer due to lower production costs compared to multiple firms.

A monopoly granted by the government to operate a certain business. It can either be government-owned or government-authorized.

A monopoly that exists because the company controls a specific technology, invention, or manufacturing method.

A monopoly that exists when there are no other producers or sellers in a specific geographic area.

A situation where a single firm controls a large portion of the market, allowing them to set higher prices and limit supply.

A group of companies working together to control prices and limit supply, effectively acting as a single monopoly.

The ability of a monopoly to set prices and control supply due to the lack of competition.

A situation where the power of a monopoly decreases as new competitors enter the market, increasing competition.

Occurs when the average cost of production decreases as the company produces more goods or services.

A company that provides essential services like water or electricity to a large community.

The practice of governments controlling the prices charged by natural monopolies to ensure fair competition and protect consumers.

The cost that a company incurs even if it produces nothing, like the cost of maintaining infrastructure.

The cost of producing one unit of a good or service.

The U.S. Postal Service has the exclusive right to deliver first-class mail, making it a government monopoly. It was originally seen as the most efficient provider, but faces competition from private companies and new communication technologies.

The government provides goods and services that private firms are either unable or unwilling to provide due to insufficient profit potential.

A legal document that grants the inventor of a new invention or process exclusive property rights for a specific period.

Polaroid's invention of the first instant camera and its patent protection created a technological monopoly in the instant photography market.

A barrier to entry refers to any obstacle that makes it difficult for new firms to enter a market. Patents can act as a barrier to entry by giving an existing company a monopoly on a particular technology.

A patent infringement occurs when a company uses another company's patented invention or technology without permission.

A situation where a firm can influence the price of a good or service by adjusting its production level.

A situation where a firm must accept the market price for a good or service, as it has no influence over price.

Similar but Differentiated Products occurs when businesses in a competitive market make their products seem different from the competitors, despite serving a similar need. They can do this through advertising, unique ingredients, packaging, or special services to convince customers their product is superior.

Product differentiation is how companies make their products stand out from competitors in the market.

Brand names help create consumer loyalty by associating positive qualities with a specific product. It's a powerful tool for product differentiation because a familiar brand inspires trust and can make customers prefer a specific product.

Advertising plays a crucial role in creating a sense of distinction. It informs consumers about product differences and persuades them to choose a specific offering.

Market research is gathering and evaluating information about consumer preferences. It helps businesses make informed decisions about their product strategy.

The goal of market research is to gain insights into consumer preferences, which helps businesses improve their product offerings and appeal to a wider audience.

In the case of local restaurants, market research often involves listening to customer feedback and observing competitors' offerings. This direct interaction gives businesses valuable insights into local tastes and trends.

By gathering information about consumer preferences, businesses can create products that better meet customer needs and stand out from the competition. This ultimately helps them gain a competitive edge in the market.