Economics- Market Structure

• Market structure


  The level of competition experienced by businesses in an industry
• Types of market structures

  • Perfect competition
  • Monopolistic competition
  • Oligopoly
  • Monopoly

  
• Perfect competition


  • Products are Homogeneous
  • Freedom of entry and exit
  • Many buyers and sellers
  • Firms are price takers
  • Firms aim to maximize Profits
  • Perfect knowledge exists
  • The demand curve is perfectly elastic
• Monopolistic competition


  • Firms produce differentiated products
  • Many buyers and sellers
  • Freedom of entry and exit
  • Firms attempt to make their own prices
  • Firms make abnormal profits
• Oligopoly


  • Firms offer the same products
  • Few large sellers and many buyers exist in the market
  • There are restrictions to entry and exit
  • The action of one firm can influence prices
• Monopoly


  • One supplier in the industry
  • There are no close substitutes to the goods being produced
  • Firms are price makers
  • There are barriers to entry
• A monopoly is where there is only one firm supplying the good or service
• Natural Monopolies are when it is cheaper to have one large company than many small ones due to economies of scale
• Economic profit = Total Revenue - Total Cost (TR - TC)
• Normal profit = TR - AC
• Barriers to Entry include patents, high start up costs, government regulation and brand loyalty.