Studied by 2 people
Characteristics of Competitive Markets
Many Sellers and Buyers
Homogeneous Products
Free Entry and Exit
Perfect Information
Price Takers
competition
Products offered by different sellers are largely similar or identical, leading to _________ primarily on price
Agricultural Markets
Markets for products like wheat, corn, and rice are often highly competitive, with many producers and buyers
Retail Markets
Markets for consumer goods like clothing, electronics, and groceries can be highly competitive, especially with the presence of multiple retailers.
Efficiency, Consumer Choice, Innovation, Lower Prices, Quality Improvement
Advantages of Competitive Markets
lower
Competition leads to ______ prices, benefiting consumers.
Low-Profit Margins, Market Volatility, Lack of Economies of Scale, Overproduction
Disadvantages of Competitive Markets
overproduction
The pressure to compete can lead to ________, resulting in waste and environmental concerns.
higher costs
Firms in highly competitive markets may struggle to achieve economies of scale, potentially leading to ________
Concentrated Markets
market where a small number of firms have a significant share of the market, allowing them to influence prices and other market outcomes
Few Sellers, Differentiated Products, Barriers to Entry, Market Power, Imperfect Information
Few Sellers
The market is dominated by a few large firms, each with significant market power
branding
Firms often offer products differentiated by quality, features, or _________
High
_____ barriers to entry exist, making it difficult for new firms to enter the market and compete
Market Power
Firms can influence prices, output, and other market factors
Oligopoly, Monopoly
Types of Concentrated Markets
Oligopoly
A market structure where a few large firms dominate the market
Monopoly
A market structure where a single firm dominates the market
Oligopoly
Characteristics of what type of concentrated markets?
Interdependence
Non-Price Competition
Price Rigidity
Collusion
Monopoly
Characteristics of what type of concentrated markets?
Single Seller
Price Maker
High Barriers to Entry
Unique Product
Economies of Scale, Research and Development, Stability, Consistency
Advantages of Concentrated Markets
Market Power Abuse, Reduced Consumer Choice, Barriers to Entry, Inefficiency
Disadvantages of Concentrated Markets
Concentrated
Examples of _________ Markets
Technology Industry, Pharmaceutical Industry
Antitrust Laws
Governments implement antitrust laws to prevent monopolies and promote competition
Encouraging Competition
Policies may be introduced to reduce barriers to entry and encourage new firms to enter the market.
Price Controls
In some cases, governments may impose price controls to protect consumers from exorbitant prices in concentrated markets.
Perfect Competition
A theoretical market structure that represents an idealized version of a competitive market
Infinite Buyers and Sellers, Zero Transaction Costs, Instantaneous Transactions, Profit Maximization
Characteristics of Perfect Competition
Imperfect Competition
Market structures that do not meet the criteria of perfect competition.
Monopolistic Competition
Oligopsony
Monopsony
Types of Imperfect Competition
Monopolistic Competition
Many firms sell products that are similar but not identical.
Oligopsony
A market where there are many sellers but few buyers
Monopsony
A market where there is only one buyer
Market Failure
Situations where the market fails to allocate resources efficiently.
Public Goods, Externalities, Information Asymmetry, Monopoly Power
Causes of Market Failure
Correcting Market Failures, Regulating Monopolies, Redistribution of Income and Wealth
Reasons for Government Intervention
Efficiency, Equity, Innovation, Consumer Welfare
Criteria for Evaluation of Market Structures
Supply Curve
Shows the relationship between price and quantity supplied
Demand Curve
Shows the relationship between price and quantity demanded
Equilibrium
The point where supply and demand curves intersect, indicating the market price and quantity
Price Elasticity of Demand (PED)
Measures how much the quantity demanded responds to changes in price.
Cross Elasticity of Demand (XED)
Measures how much the quantity demanded of one good responds to changes in the price of another good.
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