Perfect and Imperfect Competition

Perfect Competition

A market structure characterized by many sellers and buyers, identical products, perfect information, no barriers to entry/exit, and price takers.

Monopolistic Competition

A market structure with many firms, low barriers to entry, differentiated products, and price makers.

Oligopoly

A market structure with high barriers to entry, few firms, and products that can be differentiated or identical, where firms are price makers.

Monopoly

A market structure with a single firm, unique products, very high barriers to entry, and the firm acts as a price maker.

Marginal Revenue (MR) in Imperfect Competition

In an imperfectly competitive market, MR is less than price, MR curve lies below the demand curve, and the firm chooses output where MR equals MC.

Markup over Cost in imperfect competition

the price exceeds marginal revenue and marginal cost, leading to inefficiency and deadweight loss.

Deadweight Loss; where is it common

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved, common in monopolistic and oligopolistic markets.

Demand Curve in Imperfect Competition

The demand curve for a firm operating in an imperfectly competitive market is downward sloping.

Output Choice in Imperfect Competition

A firm chooses its output level where marginal revenue equals marginal cost and then determines the highest price from the demand curve for that output.