Market Structures

Identify four characteristics of a perfectly competitive market

Many buyers and sellers, identical products, free entry and exit, and perfect information

explain why firms in perfect competition are usually described as pric takers

Because no single firm is large enough to influence the market price, so they must accept the price set by the market.

Describe two key fetures of a monopoly

A monopoly has one dominant seller in the market and high barriers to entry, making it difficult for other firms to compete

explain how barriers to entry can help a monopoly maintain market power

Barriers to entry make it difficult for new firms to enter the market, reducing competition and allowing the monopoly to keep control over prices and supply.

explain one possible advantage and one possible disadvantage of monopoly power of consumers

An advantage is that monopolies can achieve economies of scale, which may lower costs and prices. A disadvantage is that consumers may face higher prices and fewer choices because there is little or no competition.

define oligopoly and explain why firms in an oligopoly may be interdependent

An oligopoly is a market structure with a small number of large firms. Firms are interdependent because the actions of one firm, such as changing prices, can affect the sales and profits of the other firms.

explain why non-price competition, such as advertising or product differentiation, is common in monopolistic competition

Non-price competition is common because firms sell similar but slightly different products and use advertising, branding, and unique features to attract customers instead of lowering prices.

compare perfect competition and monopoly in terms of number of firms, price-setting power, and consumer choice

Perfect competition has many firms, firms are price takers, and consumers have many choices. A monopoly has one firm, is a price maker, and consumers have limited choice.