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Market Structure

The document discusses different types of market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides characteristics of each type, such as perfect competition involving many small firms and a homogeneous product, monopoly involving a single seller and unique product, and oligopoly involving few sellers and either homogeneous or differentiated products.

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AMY Calong
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22 views

Market Structure

The document discusses different types of market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides characteristics of each type, such as perfect competition involving many small firms and a homogeneous product, monopoly involving a single seller and unique product, and oligopoly involving few sellers and either homogeneous or differentiated products.

Uploaded by

AMY Calong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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■ Market structure

■
■
Learning Objectives
■ This chapter is all about market structures. At the end,
you will able to distinguish the following types:
■ 1. Perfect competition
■ 2. Monopoly
■ 3.Monopolistic competition
■ 4. Oligopoly
■
Types of Market Structure

■ Perfect Competition
*Perfect, or pure competition is a market structure
characterized by:
- a large number of small firms
- a homogeneous product, and
- a very easy entry or exit from the market
■
Characteristics of Perfect Competition

■ Large number of small firms. One of the


characteristics of a perfectly competitive market are
it’s many firms and buyers, that is, a large number of
independently- acting firms and buyers, with each
firm and buyer being sufficiently small and so is
unable to influence the price of the product transacted
in the market.
■ Homogeneous product. In a perfectly competitive
market, the products offered by the competing firms
are identical not only in physical attributes but also
regarded as identical by buyers who have no
preference between the products of various producers.
■ Very easy entry and exit. This means that there are no
barriers to entry or impediments to the exit of existing
sellers.

■
Monopoly
■ *Monopoly is the opposite extreme of perfect
competition. Under monopoly, the consumer has only
two choices- either buy the monopolist’s product, or
none at all.
■ Characteristics
* a single seller or producer,
* a unique produce, and
* impossible entry into the market.
■
Characteristics
■ Single seller or producer. A monopoly market is
comprised of a single supplier selling to a multitude of
small, independently acting buyers. In other words, a
monopoly means that a single firm is the industry.one
firm provides the total supply of a product in a given
market.
■ Unique product. A unique product means that there
are no close substitutes for the monopolist’s product.
As such, the monopolist faces little or no competition.
■ Impossible entry. Barriers to entry are so serve in a
monopoly so that it is impossible for new firms to
enter the market. In other words, extremely high
barriers make it very difficult or impossible for new
firms to enter an industry.
■
Monopolistic Competition
■ * Monopolistic competition is a type of market
structure characterized by:
- many small firms,
- differentiated products, and
- easy market entry and exit.
■
Characteristics of a monopolistically competitive
market.
■ Many small sellers. Monopolistically competitive
market is comprised of a large number of
independently acting firms and buyers, however,
under monopolistic competition, just like under
perfect competition, the exact number of firms cannot
be determined.
■ Differentiated product. The product offered by
competing firms under a monopolistically competitive
market are differentiated from each other in one or
more respects. Product differentiation is the process of
creating real or apparent differences between goods
and services sold in the market.
■ Easy entry and exit. In a monopolistically competitive
market, there are no barriers entry preventing new
firms from entering the market , or obstacles in the
way of existing firms leaving the market.
■
Oligopoly
■ An oligopoly is market structure characterized by;
- few sellers,
- either a homogeneous or a differentiated product, and
- difficult market entry.
* Oligopoly, just like monopolistic competition, is found
in real world industries.
■
Characteristics of Oligopoly
■ Few sellers. Under oligopoly, the bulk of market
supply is in the hands of a relatively few large firms
who sell to many small buyer. We can therefore say
that oligopoly is competition “among the few”.
■ Homogeneous or differentiated products. In an
oligopolistic market, the products offered by suppliers
may be identical, or more commonly, differentiated
from each other in one or more respects.
■ Difficult entry. Similar to monopoly, there are
formidable barriers of entry that make it difficult for
new firms to enter the market.
■
Special Types of Market Structure
■ There are special types of market structure. (1)
Bilateral monopoly, (2) Bilateral oligopoly, (3)
Duopsony , and (5) Monopsony.
■ Bilateral monopoly is market situation comprising one
seller (like monopoly) and only one buyer ( like
monopsony). Bilateral oligopoly is a market
condition with a significant degree of seller
concentration (like oligopoly) and a significant degree
of buyer concentration (like Oligopsony).Duopsony is
a market situation in which there are only two buyers
but many sellers, Duopoly is a subset of oligopoly,
describing a market situation in which there are only
two suppliers. lastly, monopsony is a form of buyer
concentration, that is, a market situation in which a
single buyer confronts many small suppliers.
Monopsonists are often able to secure (open-ended!)

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