Questions and Answers
What is a characteristic of perfect competition?
Homogeneous products
Which type of market structure has a single seller of a product?
Monopoly
What is a characteristic of oligopoly?
Interdependent decision-making
Which type of market structure has many firms producing differentiated products?
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What is a characteristic of monopoly?
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Which type of market structure has no pricing power?
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Study Notes
Types of Market Structures
Perfect Competition
- Large number of buyers and sellers
- Homogeneous products
- Free entry and exit
- Perfect information
- No single firm has influence on market price
Monopoly
- Single seller of a product
- No close substitutes
- Barriers to entry
- Firm has significant influence on market price
Monopolistic Competition
- Many sellers of differentiated products
- Free entry and exit
- Non-price competition (advertising, product differentiation)
- Firm has some influence on market price
Oligopoly
- Few sellers of either homogeneous or differentiated products
- Interdependent decision-making
- Barriers to entry
- Firm has significant influence on market price
Characteristics of Market Structures
Number of Firms
- Perfect competition: many firms
- Monopoly: one firm
- Monopolistic competition: many firms
- Oligopoly: few firms
Product Differentiation
- Perfect competition: homogeneous products
- Monopoly: homogeneous products
- Monopolistic competition: differentiated products
- Oligopoly: either homogeneous or differentiated products
Barriers to Entry
- Perfect competition: no barriers
- Monopoly: high barriers
- Monopolistic competition: low barriers
- Oligopoly: high barriers
Pricing Power
- Perfect competition: no pricing power
- Monopoly: significant pricing power
- Monopolistic competition: some pricing power
- Oligopoly: significant pricing power
Market Structures
Perfect Competition
- Characterized by a large number of buyers and sellers
- Products are homogeneous
- Firms can freely enter and exit the market
- Buyers and sellers have perfect information
- No single firm has influence on market price
Monopoly
- Single seller of a product with no close substitutes
- Barriers to entry prevent other firms from entering the market
- Firm has significant influence on market price
Monopolistic Competition
- Many sellers of differentiated products
- Firms can freely enter and exit the market
- Non-price competition through advertising and product differentiation
- Firm has some influence on market price
Oligopoly
- Few sellers of either homogeneous or differentiated products
- Interdependent decision-making among firms
- Barriers to entry prevent other firms from entering the market
- Firm has significant influence on market price
Characteristics of Market Structures
Number of Firms
- Perfect competition: many firms
- Monopoly: one firm
- Monopolistic competition: many firms
- Oligopoly: few firms
Product Differentiation
- Perfect competition: homogeneous products
- Monopoly: homogeneous products
- Monopolistic competition: differentiated products
- Oligopoly: either homogeneous or differentiated products
Barriers to Entry
- Perfect competition: no barriers
- Monopoly: high barriers
- Monopolistic competition: low barriers
- Oligopoly: high barriers
Pricing Power
- Perfect competition: no pricing power
- Monopoly: significant pricing power
- Monopolistic competition: some pricing power
- Oligopoly: significant pricing power
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