Market Structure

• What is Market Structure?

  is a type of competition that exist in between a businesses
• Four types of Market structure

  1. Monopoly
  2. Oligopoly
  3. Monopolistic Competition
  4. Perfect Competition
• Features of Perfect Competition

  • Many firms,
  • Many buyers
  • freedom of entry and exit,
  • homogeneous product,,
  • fixed price
  • firms are price takers (firm’s demand curve perfectly elastic)
  • normal profit,
  • Perfect information and knowledge
• Features of Monopoly 


  One firm dominates the market,

  There are barriers to entry,

  Abnormal/Supernormal profits.
• Features of Monopolistic Competition

  • Many firms.
  • Freedom of entry and exit. (no barriers to entry)
  • Firms produce differentiated products.
  • Firms have price inelastic demand; they are price makers because the good is highly
  • differentiated
  • Firms make normal profits in the long run make supernormal profits in the short run
  • Firms are allocatively and productively inefficient.
• Features of Oligopoly

  • Dominated by a few large firms.
  • Interdependence of firms
  • output).
  • Barriers to entry such as brand loyalty.
  • Differentiated products.
• Disadvantages of Monopoly

  • Higher prices.
  • Allocative inefficiency.
  • Productive inefficiency
  • No incentive to reduce costs 
  • Supernormal Profit. 
  • Higher prices to suppliers
  • Diseconomies of scale 
  • Lack of incentives. 
  • Lack of choice.