Chapter 23 - market structure

Define barriers of entry

Define barriers of entry

Obstacles that make it difficult or impossible for firms to enter the market. For example, government regulations. 

Define market structure

The key characteristics of a particular market. For example, the degree of competitiveness among firms operating in the same industry.

Define competitive markets 

A competitive market is when no single business has a dominant position in the market, meaning consumers will have plenty of choices when buying goods or services.

State and explain 4 characteristics of firms operating in competitive markets: 

i) price takers - products price is based on the market price so it is not cheaper or more expensive than the market price.   

ii) sell homogeneous products - the products they sell are identical in all aspects to competitors

iii) sell differentiated products - the products they sell similar products but with different purpose or function 

iiii) earn low profit - since the market is so competitive, the prices will also be low for each firm 

Give 2 benefits of competitive market to consumer:

• Get higher quality products 

• Greater choice due to higher output

What is the impact of competition on market price and output?

With the numbers of competition increasing, the market supply curve will shift right. This causes the market price to fall, as the quantity demanded increases. 

• Competition increases, supply increase curve with shift right 

• Market price fall and quantity demanded increases 

Define monopoly markets 

A market structure where there’s only one supplier of a goods or service with power to affect market supply and prices. 

Define pure monopoly

A market structure where one company is the single source for a product and there are no substitutes for the product available 

Define price makers

Firms that set their own prices rather than having to follow the market equilibrium price determined by supply and demand

Give 4 characteristics of monopoly:

• Single supplier 

• Price makers

• Prestigious position 

• High barriers to enter

Give 2 advantages of monopoly:

• Benefit from economies of scale 

> able to produce more products and meet customers demand 

• Able to invest in innovation 

> improve productivity and increases sales (customers get differentiated products = customer satisfaction) 

Give 2 disadvantages of monopoly:

• Monopolist can charge higher prices to maximize profit 

> limited choice as there’s no substitute for it 

• Inefficient resource allocation 

                        > restrict output of a product so nd expensive lower income people won't have access 

What is the difference between monopoly and perfect competition?

In a monopoly market, there’s only one firm that sets the price and supply levels of goods and services. A perfect competition market is when all the firms in the same industry have no dominant control of the market. 

A monopoly market is when there’s a single firm that sets the price and supply level of goods and services with no substitutes available. Perfect competition is when all the firms in the same industry has no dominant control of the market. 

A monopoly market is when a single supplier controls the price and supply levels in the market. A perfect competition is when all 

the  firms in the same industry have no dominant control over the market.