market structures

• what are market structures?

  Market structures are the characteristics of the market in which a firm or industry operates
• what are the characteristics of market structures?

  • The number of buyers
  • The number and size of firms
  • The type of product in the market (homogenous or differentiated)
  • The types of barriers to entry and exit
  • The degree of competition between the firms in the market
• what can market structures be separated into?

  • Market structures can be separated into perfect competition and imperfect competition
• what market structures does imperfect competition have?

  monopolistic, oligopoly and monopoly
• what is the monopolistic market structure?

  • A market structure is one in which there are many firms offering a similar product but with some product differentiation, e.g nail salons
• what is the oligopoly market structure?

  • A market structure in which a few large firms dominate the industry, with each firm having significant market power
• what is a monopoly market structure?

  • A market structure in which there is a single supplier of a particular product and has the power to influence the market supply and price
• what can market failure be caused by?

  Market failure can be caused through the abuse of market power
• what are the signs of market failure?

  • The ability of suppliers to have control of prices
  • The ability of suppliers to restrict output in a market so as to raise prices
  • A lack of allocative efficiency
  • A lack of productive efficiency
• what is done to solve market failure?

  government intervention
• how do governments reduce abuse of market power?

  • Governments often regulate markets and intervene to prevent or reduce the abuse of market power through antitrust laws (anti-monopoly) or competition policy
• what is market power

  • Market power refers to the ability of a firm to influence and control the conditions in a specific market, allowing them to have a significant impact on price, output, and other market variables
• how can market power be measured?

  • Market power allows a firm to set prices above the competitive level or restrict output
• how can market power be measured ?

  Market power can be measured using indicators like market share, concentration ratios, or barriers to entry

  • A higher market share or concentration ratio suggests a greater degree of market powermonopolies have a higher market power
  • firms in perfect competition have less market power

  
• what happens when a firm is closer to being a monopoly?

  • The closer a firm is to being a monopoly, the higher the concentration ratio, market share and market power
  • Competition is greatly diminished and the benefits of competition are likely to be lost
• what happens when a firm is closer to being perfectly competitive?

  • The closer a firm is to being perfectly competitive, the lower the concentration ratio, market share and market power
  • Competition is enhanced and the significant benefits of competition are likely to be gained
• in competitive markets, what are price and output determined by?

  • In competitive markets, no single firm has substantial market power, and prices and outputs are determined by the forces of supply and demand