Competitive Markets Overview

These flashcards cover key concepts and characteristics of competitive markets, types of market structures, and factors affecting competition.

What are the four major types of market structures?

Pure or atomistic competition, Monopolistic competition, Monopoly, Oligopoly.

What is a key characteristic of a competitive market?

A market structure comprising many buyers and sellers, each selling small proportions and unable to influence the market price.

What does Porter's Five Forces model assess?

It assesses the level of competition within an industry and its attractiveness based on factors like the threat of substitutes, new entrants, and bargaining power of suppliers and buyers.

What is a monopoly market?

A market structure where only one firm produces a specific product with no close substitutes, controlling the entire market demand.

What distinguishes monopolistic competition from pure competition?

Monopolistic competition has few dominant firms alongside a large number of competitive fringe firms with highly differentiated products.

What defines an oligopoly market?

A market structure with a few closely related firms where the actions of one firm significantly impact the others.

What typically influences price and quantity relationships in oligopolies?

Consumer preferences, substitutability, advertising, and price responses by competitors.

What is the significance of barriers to entry in monopoly markets?

Barriers to entry prevent new firms from entering the market, allowing the existing monopoly to maintain market power.

How do competitive firms react to abnormal profits?

Abnormal profits attract new entrants, causing a decrease in price and quantity until profits normalize.

What are the characteristics of a perfectly competitive market?

Homogeneous products, complete knowledge of market information, free entry and exit, and minimal barriers to entry.