Questions and Answers
Which of the following is a type of competition?
What is a monopoly?
A monopoly is a market containing a single firm that has or is close to total control of the sector.
What characterizes monopolistic competition?
Many firms offer similar products or services, and all have a relatively low degree of market power.
What defines oligopolistic competition?
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What are the criteria for perfect competition?
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Study Notes
Types of Competition
- Four primary market types: Monopoly, Oligopolistic Competition, Monopolistic Competition, Perfect Competition.
Monopoly
- Defined as a market with a single firm exerting near-total sector control.
- Monopolies face antitrust regulations aimed at protecting consumer interests and preventing exploitative practices.
- Firms may be compelled to divest assets to comply with anti-monopoly laws.
Monopolistic Competition
- Characterized by numerous firms providing similar, yet not perfect substitute products or services.
- Low barriers facilitate ease of entry and exit in the market.
- Actions by one firm do not heavily influence competitors; all firms possess a comparable level of market power.
- Demand in the long run is highly elastic, responding sensitively to price changes.
- Short-run profits may exist; as competition increases, profits trend towards zero in the long run.
- Firms often engage in significant advertising to differentiate their products.
Oligopolistic Competition
- Market structure dominated by a few firms that hold the majority of the market share.
- Oligopolies can resemble monopolies, though two or more firms share market control.
- The number of firms must be limited enough that one firm's actions substantially affect others, creating interdependence.
Perfect Competition
- Defined by five criteria: identical products offered by all firms, price takers with no control over market pricing, small individual market shares, complete buyer information, and freedom of entry and exit.
- Sometimes referred to as "pure competition" due to its stringent market requirements.
- Ensures that no single firm can influence prices or market conditions significantly.
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Description
Explore the different types of competition in markets with this flashcard set. From monopoly to perfect competition, learn key definitions and concepts that shape market dynamics. Ideal for students looking to enhance their understanding of economic structures.
